Disinvestment: Govt approves Tata Steel’s Rs 12,100-cr bid for NINL

• Apart from Tata Steel, the govt had received bids from a consortium of Jindal Steel & Power Limited and Nalwa Steel and Power Ltd and JSW Steel for NINL disinvestment
• The govt has said that employees' dues has been kept as the top-most ranking liability in the Waterfall Agreement prepared for the deal

New Delhi: After Air India, Tata Group is now set to bag another Public Sector Undertaking (PSU) as the government has approved the Rs 12,100-crore bid submitted by Tata Steel for Neelanchal Ispat Nigam Ltd (NINL), which brings Centre's another disinvestment plan to fruition. In an official statement, the Ministry of Finance said, "Alternative Mechanism, comprising Shri Nitin Gadkari, Union Minister for Road Transport and Highways, Smt. Nirmala Sitharaman, Union Minister for Finance & Corporate Affairs and Shri Piyush Goel, Union Commerce & Industry Minister, which is empowered by the Cabinet Committee on Economic Affairs, have approved the highest bid of M/s Tata Steel Long Products Limited for 93.71 percent of shares of Joint Venture partners of 4 CPSEs and 2 Odisha Govt State PSEs at the Bid Enterprise Value of Rs 12,100 crore."

NINL is a joint venture of four PSUs — MMTC, NMDC, BHEL, MECON and 2 Odisha state government PSUs, OMC and IPICOL. NINL has an integrated steel plant with a capacity of 1.1 MT, at Kalinganagar, Odisha. The company has been running in huge losses and the plant has suspended operations since March 30, 2020. "The company has huge debt and liabilities exceeding Rs 6,600 crore as on 31.3.2021, including huge overdues of promoters (Rs 4,116 crore), Banks (Rs 1,741 crore), other creditors and employees. The company has negative net worth of Rs 3,487 crore and accumulated losses of Rs 4,228 crore as of 31.3.2021," said the ministry.

"Govt. of India does not hold any equity in the company. However, on the request of the Boards of selling shareholder PSEs and on concurrence by the Govt of Odisha, CCEA 'in-principle' approved strategic disinvestment of NINL on 8.1.2020, and authorised Department of Disinvestment & Public Asset Management (DIPAM) to undertake the transaction," it added.

Disinvestment: Bidding done on Enterprise Value of NINL

"The transaction was made through an open-market, competitive bidding process towards the Enterprise Value of the company, comprising the liabilities of the company as on 31.3.2021 and the 93.71 percent equity of the company held by the six selling PSE shareholders. The transaction was executed through the extant consultative multi-layered decision mechanism-based procedure involving Inter Ministerial Group (IMG), Core Group of Secretaries on Disinvestment (CGD) and the empowered Alternative Mechanism. Govt of Odisha with their companies, OMC & IPICOL having stake of 32.47 percent was also part of the decision-making at every stage," said the Finance Ministry.

The government had invited Expressions of Interest (EoI) for NINL disinvestment on January 25, 2021. "As per the extant procedure, the Reserve Price was subsequently recommended by the IMG after detailed examination of the valuation reports prepared by the TA and the AV, and was approved by the CGD at Rs 5,616.97 crore," said the Finance Ministry.

Three financial bids were received in response. According to the ministry, apart from Tata Steel, a consortium of Jindal Steel & Power Limited and Nalwa Steel and Power Ltd and JSW Steel Limited had thrown their hats in the ring. "M/s Tata Steel Long Products Limited (TSLP) emerged as H-1 bidder, whose bid has been accepted by the AM. Letter of Intent (LoI) is being issued to TSLP inviting them to sign the SPA. At this stage, 10 percent of the bid amount shall be paid by the successful bidder into the Escrow account," said the statement.

Part of proceeds of sale to be infused into NINL by new owner

Part of the proceeds of the sale will be infused by the new owner into the company to settle liabilities. "On the closure date, shares will be transferred to the strategic buyer and the balance amount will be received to be utilised in the manner prescribed in the Waterfall agreement 27.10.2021 signed amongst the selling shareholders. Part-sale proceeds would be infused in the company to the extent of the liabilities which will be set-off and the balance amount in the escrow account will selling shareholders proportional to their shareholding," said the government.

'First privatisation of a steel PSU in India'

"This is the first instance of privatisation of a public sector steel manufacturing enterprise in India. The success of the transaction is a win-win situation for all. The biggest advantage of privatisation will be to the local economy of the region as the strategic buyer will be able to revive a closed plant, bring in modern technology, best managerial practices and make infusion of fresh capital, which will help in augmenting the capacity of the plant," the government added.

The Centre said that the government of Odisha gave active support to the process of privatisation. "The privatisation will help in creating new jobs in the region by creation of ancillary industries and supplier's network. Keeping in view the best interest of the serving employees, it was decided to keep the employees' dues as the top-most ranking liability in the Waterfall Agreement to be satisfied first before any other liability," said the Centre.

The transaction is on "going concern" basis and the employees of NINL will continue to be the employees of the company in terms of the Share Purchase Agreement (SPA), which binds the buyer to have a lock-in period of one year. The strategic buyer will also be bound to follow the terms of VRS applicable to CPSEs whenever such a decision is taken.

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