NINL sold to Tata steel for Rs. 12,100 crore

New Delhi, Feb 1: As PM Narendra Modi said in the parliament, “Government has no business to be in business.” Modi government is moving rapidly towards the Privatization of Government-owned companies. Sell of majority stakes of Neelachal Ispat Nigam Ltd (NINL) to Tata Steel is the newest addition to this privatization process.

 

 

 

An empowered cabinet committee (an alternate mechanism) comprising of Union Minister Nitin Gadkari, Nirmala Sitharaman, and Piyush Goel, has approved the bid of Tata Steel Long Products Limited to acquire a majority stake in Neelachal Ispat Nigam Ltd (NINL)

 

 

 

Tata Steel Long Products's bid quoting an enterprise value of Rs. 12,100 crore was approved by the cabinet committee. Tata Steel Long Products out bided JSW Steel Limited and a consortium of Jindal Steel & Power Limited and Nalwa Steel and Power Ltd.

 

NINL is a joint venture of 4 central public sector undertakings - Minerals and Metals Trading Corporation (MMTC), NMDC, BHEL, MECON- and 2 two Odisha government-owned undertakings OMC and IPICOL. The central and state PSU together held a 93% stake in the company.

 

MMTC is the largest shareholder of NINL having a 49.78 percent share, apart from NMDC, which holds 10.10 percent Two Odisha government entities, Odisha Mining Corporation (OMC) and Industrial Promotion and Investment Corporation of Odisha Ltd (IPICOL), hold 20.47 percent and 12 percent respectively. The remaining 7.65 percent is owned by an unlisted entity.

 

NINL has an integrated steel plant with a capacity of 1.1 MT, at Kalinganagar, Odisha. Set up in 1982 to promote industrialization in the state of Odisha, the company has been underperforming for many years and running in huge losses. The steel plant ceased operating in March 2021.

 

The company has huge debt and liabilities exceeding Rs. 6,600 crores as oof31.3.2021, including huge overdue promoters (Rs 4,116 crore), banks (Rs 1,741 crore), other creditors, and employees. The company has a negative net worth of Rs. 3,487 crore and accumulated losses of Rs. 4,228 crore as of March 2021.

 

Tata Steel will get the mining rights and leasehold land spread over 2,500 acres. Given that Tata Steel has a significant presence in Odisha where it operates a 3mt plant at Kalinganagar (and expanding it), the group viewed NINL as a strategic fit to the existing unit, apart from increasing exposure to the long products.

 

Even though the union government does not hold any direct equity in the company, the boards of the PSUs authorized the department of Disinvestment & Public Asset Management (DIPAM), a division of the Union Finance Ministry, to undertake the sale transaction.

 

In late 2020, the Union Cabinet headed by Prime Minister (PM) Narendra Modi had cleared the strategic disinvestment of equity shareholding of the PSUs in NINL in 2020 following which DIPAM had in January this year invited the preliminary bids.