Sale of steel business: Usha Martin board may discuss Tata, JSW offers

Usha Martin is likely to discuss offers from Tata Steel and JSW Steel for its steel business during its board meeting on Monday.

The company had reached out to steel players a little over a month ago, after which discussions were opened. The board meeting is likely on June 11, sources said.

Evaluating strategic options for growth is an ongoing process in the company, Tata Steel said. The company clarified to the stock exchanges it had not submitted any bid to acquire Usha Martin's steel business. 

"The company is, from time to time, involved in discussions on various strategic matters in connection with the business activities including due diligence of potential acquisitions. Many such discussions are ongoing and our policy is not to comment on speculation with respect to such discussions," the firm said.

Shares of Usha Martin were locked in the upper circuit of 20 per cent at Rs 28.90. It finally closed at Rs 28.20, up 17.01 per cent on the BSE.

Sale of steel business was aimed at paring the debt the company, which according to sources, was close to Rs 50 billion. Tata Steel was understood to have indicated an offer of Rs 60 billion while JSW Steel was said to have around Rs 45 billion for the Jamshedpur facility.

However, there is a shareholder dispute in Usha Martin and a consensus among major shareholders might be necessary for the sale to go through, sources added.

 

There are two promoter factions at Usha Martin: Brij Jhawar and his son, Rajeev Jhawar, currently the managing director, on the one side, and chairman emeritus Basant Kumar Jhawar and his son, Prashant Jhawar on the other side. Both the factions have an equal share of 25.5 per cent in Usha Martin.

Sources said there is a National Company Law Tribunal order, directing the promoter and entities to maintain status quo on shareholding and hence a family settlement or a consensus among shareholders might have to precede the sale of the business.

Earlier, Usha Martin was actively looking at selling its wire and wire ropes business but a change in market conditions for the steel sector prompted it to look at the sale of that business, said sources. 

While the steel business accounts for the major chunk of revenues, the wire ropes business is a more profitable one. Revenue from steel business is around Rs 34.21 billion and profit before tax is Rs 0.99 billion. The wire and wire ropes business accounts for revenues of Rs 15.17 billion and profits of Rs 2.09 billion.