Tata Steel Long Products declared the winning bidder for Neelachal Ispat Nigam Limited

Tata Steel Long Products declared the winning bidder for Neelachal Ispat Nigam Limited
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Tata Steel Long Products declared the winning bidder for Neelachal Ispat Nigam Limited

Highlights

Tata Steel Limited on Monday announced that Tata Steel Long Products Limited, a subsidiary of Tata Steel, has been announced as the winner of the bidding process to acquire a 93.71 per cent stake in the 1 million ton per annum Neelachal Ispat Nigam Limited (‘NINL’).

Tata Steel Limited on Monday announced that Tata Steel Long Products Limited, a subsidiary of Tata Steel, has been announced as the winner of the bidding process to acquire a 93.71 per cent stake in the 1 million ton per annum Neelachal Ispat Nigam Limited ('NINL'). The declaration was made in accordance with the process being run by the Department of Disinvestment & Public Asset Management ('DIPAM'), Government of India.

While Tata Steel's growth in Flat Products would be pursued through the Kalinganagar and Meramandalli sites in Odisha apart from the existing capacity in Jamshedpur, NINL will become the hub for its Long Products business in the future. Located in close proximity to Tata Steel's world-class site of Kalinganagar, this is a strategic acquisition for the Tata Steel business in India with around one million tons per annum of steel-making capacity, 2500 acres of land for future growth and iron ore reserves of around 100 million tons.

Tata Steel in a statement said, "The acquisition of NINL provides a significant opportunity for Tata Steel to not only restart the one million ton per annum steel plant expeditiously but also begin work immediately to build a 4.5 million ton per annum state of the art long products complex in the next few years, and further expand it to 10 million ton per annum by around 2030. The acquisition of NINL is critical for Tata Steel to build such a dedicated long products complex which will also be best positioned to leverage synergies with the shared infrastructure of Tata Steel in the area. It is Tata Steel's endeavour to utilise its expertise in operating excellence, mining and project management to transform NINL into a state of the art, competitive and sustainable enterprise in the future. This investment also reflects Tata Steel's commitment to the state of Odisha and the communities around our operations."

The long products segment in India is poised to witness significant growth as India builds its infrastructure and industrialisation through the Atmanirbhar Bharat Program of the Government. Tata Steel will leverage its capability in the long products business using its strong brand equity, particularly in the retail construction segment, and its extensive, pan-India retail and distribution network to drive scale and profitability in Long Products. The acquisition will also facilitate growth in downstream solutions and specialty high-end products catering to customers in the construction, heavy engineering and automotive space.

The total consideration of Rs 12,100 crore reflects the enterprise value (including all recorded liabilities) as part of the acquisition of a 93.71 per cent equity stake in NINL. The acquisition is being financed through a combination of internal accruals and bridge loans which are expected to be paid down through the internal generation of Tata Steel over the next few quarters. Tata Steel continues to be focused on its enterprise strategy to deleverage its Balance Sheet while it pursues its growth priorities. The transaction is scheduled for closure within the next couple of months as per the process timelines announced by DIPAM, the Government of India.

The central government's Alternative Mechanism, comprising Nitin Gadkari, Union Minister for Road Transport and Highways; Nirmala Sitharaman, Union Minister for Finance & Corporate Affairs and Piyush Goyal, Union Minister of Commerce & Industry, Consumer Affairs, Food and Public Distribution and Textiles, which is empowered by the Cabinet Committee on Economic Affairs, has approved the highest bid of M/s Tata Steel Long Products Limited for 93.71 per cent of shares of Joint Venture partners of 4 CPSEs and 2 Odisha Govt State PSEs.

Neelachal Ispat Nigam Ltd. (NINL) is a joint venture of 4 CPSEs, namely MMTC, NMDC, BHEL, MECON and 2 Odisha Government PSUs, namely 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 is closed since March 30, 2020. The company has huge debt and liabilities exceeding Rs. 6,600 crores as of March 31, 2021, including huge overdue promoters (Rs 4,116 crore), Banks (Rs 1,741 crore), other creditors and employees. The company has a negative net worth of Rs 3,487 crore and accumulated losses of Rs 4,228 crore as of March 31, 2021.

The Expressions of Interest (EoI) were invited on January 25, 2021. Multiple EoIs were received by the due date of March 29, 2021. The interested parties were given the opportunity to undertake the due diligence procedure by providing them access to the virtual data room of the company. These interested parties also made site visits and were provided with the proposed terms and conditions of the sale in the form of the draft SPA. Considering their feedback, the SPA was finalised on approval by AM and was shared with the bidders along with the RFP issued on December 3, 2021, for inviting financial bids.

In response, 3 bids were received by the due date, i.e., December 23, 2021, in a sealed cover that was kept in safe custody. As per the extant procedure, the Reserve Price was subsequently recommended by the IMG after a detailed examination of the valuation reports prepared by the TA and the AV and was approved by the CGD at Rs 5616.97 crore. Thereafter, the financial bids were opened for the following qualified bidders, who had submitted the bids:

- Consortium of M/s Jindal Steel & Power Limited and Nalwa Steel and Power Ltd.

- M/s JSW Steel Limited - M/s Tata Steel Long Products Limited (TSLP)

M/s Tata Steel Long Products Limited (TSLP) emerged as the 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 per cent of the bid amount shall be paid by the successful bidder into the Escrow account.

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