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Tata's complete takeover of Usha Martin's steel business

Apr 10,2019

Tata Sponge has said it has completed the acquisition of Usha Martin steel business undertaking including captive power plants, on Tuesday, April 09, 2019.


The deal was completed “in accordance with a cash consideration of Rs 4094 crore payable to Usha Martin Ltd after adjustment for negative working capital and debt like items," Tata Sponge said in an official notification to the exchanges. This is subject to "further holdbacks of Rs 640 crore, pending transfer of some of the assets including mines and certain land parcels," the Tata Sponge statement added.


Tata Sponge is Tata Steel's chosen vehicle for the acquisition of Usha Martin Ltd steel division. Tata Steel had entered into an agreement for acquiring Usha Martin Ltd steel division in September 2018.


Earlier On October 24, 2018, Tata Sponge had informed the exchanges that the company's board of directors had decided to acquire the steel arm of Usha Martin Ltd through a slump sale on a going concern basis.


The deal amount will be deposited in an escrow account of SBI and will be utilized to repay Usha Martin's debt. "The money has come in and it will go directly to lenders for repayment of Usha Martin Ltd debt," a top Usha Martin official said. The remaining part, amounting to around Rs 640 crore will come in after the transfer of the iron ore and coal mines and a parcel of land measuring about 75 acres. Usha Martin Ltd has already received the Jharkhand government’s nod for transfer of the assets," the official added. All employees pertaining to Usha Martin Ltd’s steel business will be transferred to the Tata group as part of the divestment.


The deal will add to Tata Steel's portfolio of automotive steels, which has been strengthened with the acquisition of Bhushan Steel one of India’s largest automotive steel producers.


The deal brought the tussle between the Usha Martin promoters to the fore. It was opposed by Prashant Jhawar, co-promoter and cousin of Usha Martin MD, Rajeev Jhawar, who was removed from the post of Usha Martin Ltd chairman by lenders led by SBI in April 2017.


He had raised questions about the expected net proceeds from the sale of steel division of Usha Martin Ltd and funds likely to be used for repayment and whether there was any independent supervision by the board on an operation of the escrow amount.