Tata Steel’s subsidiary Tata Sponge Iron is likely to take over the steel alloy manufacturing plant of debt-ridden Usha Martin by Tuesday. Tata Steel had executed definitive agreements with the Kolkata-based company in September last year for the acquisition of the latter’s steel business for a cash consideration of between Rs 4,300 and Rs 4,700 crore. Usha Martin’s steel business includes one-million-tonne steel alloy manufacturing plant near Jamshedpur in Jharkhand, an operative iron ore mine, a coal mine under development and captive power plants.
The Competition Commission of India (CCI) had in December approved the acquisition. Notably, Tata Steel holds 54.5% shareholding in Tata Sponge Iron, which is one of India’s largest merchant sponge iron manufacturers. “The steel unit is expected to be taken over at midnight tonight,” a source close to the development told FE on Monday. “The acquisition of iron ore mine and coal mine will take place later as it requires some additional processing,” the person said, adding the Tata company has already transferred a “substantial amount of money” for the buyout.
When contacted, a Tata Steel spokesperson said, “Some point of time the takeover of the Jamshedpur plant has to happen. There is a process, which is on at the present moment. The takeover will happen when the process will culminate.” Rajeev Jhawar, who is the managing director of Usha Martin, could not be contacted by phone for a comment.
Notably, Usha Martin’s board had in June last year decided to explore the sale of its steel business and constituted a committee to appoint investment banks and consultants to help evaluate proposals and oversee the potential sale process. The company’s integrated steel plant near Jamshedpur has one million tonne capacity annually. It had decided to explore the sale of the steel unit mainly to reduce huge long-term debt.
The company had constituted a committee of independent directors to oversee the process of selling the steel business. SBI Caps had been appointed as the merchant banker.