Disinvestment: DIPAM floats PIM, invites EoI for NINL privatisation

• Bidders can send in queries by February 25 and the last date for submission of EoIs is March 29

• The shortlisted bidders would be required to quote for NINL on an enterprise value basis which would be payable upfront, said DIPAM

New Delhi: The government has floated a Preliminary Information Memorandum (PIM), and has sought Expression of Interest (EoI) for the strategic disinvestment/privatisation of 100 percent shareholding of various state-run organisations in Odisha-based Neelanchal Ispat Nigam Ltd (NINL). According to a notification released by the Department of Investment and Public Asset Management (DIPAM) on Monday, bidders can send in queries by February 25 and the last date for submission of EoIs is March 29. The last date for submission of physical copies of EoIs submitted electronically is April 5. 

"As a part of the strategic disinvestment, management and control of NINL will be transferred to the successful bidder through a transaction mechanics that include purchase of shares and infusion of funds (the details of mechanics will be detailed in RFP) into NINL which will be used to re-pay existing debt of NINL at or around the time of closing itself. By way of control of NINL, the control on entire business of NINL (including mining rights and leasehold rights on the land currently with NINL) will also stand transferred," said the document.

Bidding to take place on enterprise value

The shortlisted bidders would be required to quote for NINL on an enterprise value basis which would be payable upfront, said DIPAM. The amount payable by the successful bidder would be applied (on a priority basis) towards the settlement of labour dues, operational creditors, commercial lender debt, promoter debt and purchase of 93.71 percent of shareholding of NINL as per a pre-determined waterfall mechanism.

Enterprise value shall mean combined value of debt and equity of NINL as assessed by the bidder in its financial bid, said DIPAM.

Two-stage bidding process; employee consortiums can bid

The bidding process for strategic disinvestment of NINL will be a two-stage process. In stage I, EoIs will be evaluated on the basis of eligibility criteria and disqualification conditions detailed in the PIM. In stage II, the shortlisted bidders will be provided with Request for Proposal (RFP) / Definitive Agreement(s) through the data room/ e-mail to review documents pertaining to NINL and would be required to undergo a transparent bidding process. The interested bidder should have a minimum net-worth of Rs 2,000 crore.

While government companies will not be allowed to take part in the disinvestment process, employee consortiums can. 

NINL

NINL was incorporated in 1982 to set-up an integrated steel plant to undertake manufacturing and sale of steel products. Total land area leased to NINL at the existing facility is around 2,500 acres having land for future expansion. The land bank may be of interest to new investors since it may provide a ready expansion opportunity. The plant facilities are located at strategic location at Kalinganagar Complex, Odisha, with proximity to iron ore and other raw materials. Further, it has good connectivity with road, rail network and proximity to Paradip port for transport of finished products and raw materials movement. The company has been allotted iron ore mine in Sundargarh and Keonjhar district of Odisha with an estimated mineable reserve of around 90.91 Million Tonne.

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NINL's authorized capital as on September 30, 2019 is Rs 1,900 crore, issued and subscribed capital is Rs 747.64 crore and paid up share capital is Rs 740.71 crore. The net worth of the company has eroded since FY2012-13 and the current liabilities stood at Rs 3,778.83 crore at the end of H1 of FY2019-20.

Though the financial performance of the company has remained subdued over the past few years, the company has generated comfortable margins from 2006 to 2010 when the steel market was on a growth trajectory, the PIM said.

The backdrop

On January 8, 2020, the Cabinet Committee on Economic Affairs had given an 'in principle' approval for strategic disinvestment of equity shareholding of MMTC (49.78 percent), NMDC (10.10 percent), MECON (0.68 percent), BHEL (0.68 percent), IPICOL (12.00 percent) and OMC (20.47 percent) in NINL to a strategic buyer, identified through a two-stage auction procedure.  

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