S&P advices Govt on divestment of shares in PSUs

LE Desk

New Delhi, February 3, 2022:  Saraf and Partners has advised the Department of Disinvestment & Public Asset Management (DIPAM), Government of India, on disinvestment of 93.71% of shares of four Central Public State Enterprises and two Odisha Government PSUs in Neelanchal Ispat Nigam Limited (NINL).

The four Central Public State Enterprises are MMTC, NMDC, BHEL, MECON, while the two Odisha Government PSUs are OMC and IPICOL.

Tata Steel Long Products Limited has been declared the highest bidder with bid on enterprise valuation of INR 12,100 crores (approx. USD 1.62 billion) for the above mentioned divestment, the Law Firm said in a press statement.

This deal is of immense significance as this is the first instance of privatisation of a public sector steel manufacturing enterprise in India, it said.

The S&P Team was led by Partners Akshay Nagpal and Akshay Jain, assisted by Associates Udyan Arya Shrivastava, Nikhil Issar, Prakhar Mittal, Akshay Sharma and Prarthna Bathija.

Saraf and Partners advised and acted for the GoI’s Department of Disinvestment & Public Asset Management which undertook the transaction upon request of the selling shareholders. It was pursuant to authorization by the Cabinet Committee on Economic Affairs in its ‘in-principle’ decision on disinvestment of NINL through an open-market, competitive bidding process towards the enterprise value of NINL comprising the liabilities of the company as on March 31, 2021 and the 93.71% equity of the company held by the six selling PSE shareholders.

The selling shareholders did not have any separate external legal counsels for the transaction, S&P said.

Three financial bids were received on an enterprise valuation basis for NINL, out of which the highest bid of Tata Steel Long Products Limited, of Rs 12,100 crores has been declared to be successful bid as per official press release of Ministry of Finance dated January 31, 2022, the statement said.

After signing of the definitive documents for the transaction and closing of the transaction, shares will be transferred to the strategic buyer and part of the proceeds out of consideration would be infused in the company to the extent of the liabilities which will be set-off and the balance amount will be used to purchase the shares of the selling shareholders proportional to their shareholding.

NINL’s plant was shut since March 30, 2020 and had huge debt and liabilities exceeding Rs 6,600 crores as on March 31, 2021, including huge overdues of promoters (Rs 4,116 crore), Banks (Rs 1,741 crore), other creditors and employees.  The company has negative net worth of Rs 3,487 crore and accumulated losses of Rs 4,228 crore as on March 31, 2021.

This transaction will not only lead to recovery of debt by selling shareholders, debt by various public sector banks and realization of equity value by the selling shareholders, the disinvestment will be a big boost 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 infusion of fresh capital, which will help in augmenting the capacity of the plant, the press statement said.