The government has approved the sale of Neelachal Ispat Nigam Ltd. (NINL) to Tata Steel Long Products Limited at an enterprise value of ₹12,100 crore, the Finance Ministry said on Monday.
The Government of India has no equity in NINL, a loss-making joint venture of four central public sector firms — MMTC, NMDC, BHEL, MECON —and two Odisha PSUs. NINL has an integrated steel plant with a capacity of 1.1 million tonnes (MT) at Kalinganagar, Odisha, which has been shut since March 30, 2020, and the firm has accumulated debt and liabilities exceeding ₹6,600 crore as on March 31, 2021.
Tata Steel said in a statement that the NINL acquisition was strategic and provided ‘a significant opportunity to not only restart the one-million-tonne-per-annum (MTPA) steel plant expeditiously’ but also begin work immediately to build a 4.5 MTPA state-of-the-art long products complex in the next few years, and further expand it to 10 MTPA by about 2030.
The NINL acquisition by its long products subsidiary, the firm added, was being financed through a combination of internal accruals and bridge loans which are expected to be paid down over the next few quarters. The transaction is expected to attain closure within the next couple of months.
JSW Steel and a consortium of two firms — Jindal Steel and Power and Nalwa Steel and Power — were the other two bidders who evinced interest in NINL’s sale undertaken through an open-market, competitive bidding process.
The Alternative Mechanism empowered by the Cabinet Committee on Economic Affairs to approve such privatisation transactions, comprising Union Minister for Road Transport and Highways Nitin Gadkari, Finance and Corporate Affairs Minister Nirmala Sitharaman and Commerce and Industry Minister Piyush Goyal, has okayed the sale.
The Odisha government, with its companies OMC and IPICOL, which have 32.47% stake in NINL, was also part of the decision-making at every stage, the Finance Ministry said. 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, the Ministry said. The post-sale consideration will go towards settling of the liabilities of NINL.
Calling it the first instance of privatisation of a public sector steel manufacturing enterprise in India, the Finance Ministry said the transaction is a win-win 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 and best managerial practices, and make infusion of fresh capital, which will help in augmenting the capacity of the plant,” it emphasised.
