Tata Steel completes the acquisition of Neelachal Ispat

Tata Steel completes acquisition of NINL
Tata Steel completes acquisition of NINL

by 5paisa Research Team Last Updated: Dec 14, 2022 - 05:50 am 23k Views

Tata Steel Long Products Ltd, a unit of Tata Steel, has officially completed the acquisition of state-owned Neelachal Ispat Nigam Ltd. This was one of the companies identified by the government as a candidate for divestment and Tata Steel had won the bid outbidding several other steel players. Tata Steel Long Products Ltd has paid a total consideration of Rs12,100 crore for acquiring full control of Neelachal Ispat. The additional capacity of Neelachal, is likely to have direct synergies with the business model of Tata Steel.

Neelachal Ispat was one of the companies identified by the government for strategic divestment wherein the government will not only pass full ownership but also full management control over the company and its resources for more efficient utilization. The strategic divestment process for Neelachal Ispat, the Odisha-based steelmaker, had begun in January 2021 but the entire process took nearly 18 months to fructify. Neelachal Ispat is now officially part of the Tata Steel Long Products umbrella.

The takeover of Neelachal Ispat by Tata Steel Long Products was completed with the transfer of 93.71% shares of all joint venture partners to the Tata Group firm. Neelachal Ispat, manufactures pig iron and billets. The following companies had ownership in Neelachal Ispat in the proportioned mentioned. MMTC (49.78%), NMDC (10.10%), BHEL (0.68%), MECON Ltd (0.68%), Odisha Mining (20.47%) and Industrial Promotion Corp. of Odisha (12%). The balance stake is held by banks and insurance companies.

As part of the agreement, Tata Steel paid the full enterprise value of Rs12,100 crore as calculated for the strategic buyer. This payment has been utilized as per the share purchase agreement for settlement of dues to the employees, operational creditors, secured financial creditors and selling shareholders under the terms of the agreement. Under the strategic divestment plan of the government the government will not only sell the ownership to the private buyer but also transfers full management control to bring in private management.

Tata Steel Long Products was declared the winning bidder among several bidders. It included a consortium of Jindal Steel and Power, Nalwa Steel and Power and JSW Steel; all part of the Jindal group. The sale also included transfer of mining rights and leasehold rights of lands held by the public sector enterprise that was under the steel ministry to the buyer. This should add to the long term value of the acquired company and make the deal more valuable to the acquirer.

The Tatas acquired Neelachal Ispat Nigam Ltd (NINL) as part of the government’s disinvestment programme. NINL is expected to add  strategic and operational value to Tata Steel. With the help of NINL, Tata Steel would be in a position to restart the 1 million tonnes per annum (MTPA) steel plant expeditiously. Tatas will also begin work to build a 4.5 million tonnes per annum (MTPA) state-of-the-art long products complex in the coming years.

Currently, Neelachal Ispat Nigam Ltd (NINL) has an integrated steel plant with a capacity of 1.1 million tonnes (MT) at Kalinganagar, Odisha. The company had already been running in huge losses and the plant had been lying shut since March 30, 2020.

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