Neelachal Ispat is a partnership between four CPSEs and two Odisha government PSUs.
On Monday, the government announced the sale of the loss-making Neelachal Ispat Nigam Ltd (NINL) to Tata Steel Long Products Ltd for Rs 12,100 crore.
NINL is a partnership between four CPSEs (MMTC, NMDC, BHEL, MECON) and two Odisha government PSUs (OMC and IPICOL). In Kalinganagar, Odisha, NINL operates an integrated steel plant with a capacity of 1.1 million tonnes (MT). The company has been losing a lot of money, and the plant has been closed since March 30, 2020.
Three companies had made financial bids to buy NINL: the Consortium of Jindal Steel & Power Limited and Nalwa Steel & Power Ltd; JSW Steel Limited; and Tata Steel Long Products Limited (TSLP).
TSLP emerged as the winning H-1B bidder, and its offer was accepted. TSLP has been sent a letter of intent (LoI) inviting them to sign the share purchase agreement (SPA). At this point, the successful bidder must deposit 10% of the bid amount into the escrow account.
The government has approved a strategic buyer for Odisha’s NINL. DIPAM Secretary Tuhin Kanta Pandey tweeted that the highest bid of Rs 12,100 crore by M/s Tata Steel Long Products Ltd has been accepted.
As of March 31, 2021, NINL’s debt and liabilities exceeded Rs 6,600 crore, including massive overdue from promoters (Rs 4,116 crore), banks (Rs 1,741 crore), other creditors, and employees.
As of March 31, 2021, the company had a negative net worth of Rs 3,487 crore and accumulated losses of Rs 4,228 crore.
Notably, the government earlier this month transferred ownership of the loss-making national carrier Air India to Tata Group for Rs 18,000 crore.
“This is India’s first example of a public sector steel manufacturing enterprise being privatized. All parties benefit from the transaction’s success. The most significant benefit of privatization 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 an infusion of fresh capital, all of which will aid in increasing the plant’s capacity.
“The Odisha government has actively supported the privatization process. The privatization will aid in the creation of new jobs in the region by establishing ancillary industries and a supplier network. With the best interests of the serving employees in mind, it was decided to keep the employees’ dues as the highest-ranking liability in the Waterfall Agreement, to be satisfied before any other liability “According to a statement issued by the Ministry of Finance.