Usha Martin-Tata Steel deal: Basant-Prashant Jhawar may sell majority stake

Basant and Prashant Jhawar had been pressing for the sale of the entire company, even while discussion with Tata Steel was on for transfer of the steel business

Basant and Prashant Jhawar, one half of the differing promoter group in Usha Martin, could sell majority shares of the company, sources said.

The father-son duo has 25.5 per cent of the Usha Martin equity. So does the other group, of Brij and Rajeev Jhawar.

It appears Basant and Prashant have evinced interest in selling 19.9 per cent to Tata Steel, which says it has no comment to offer on this subject. Sources close to Prashant Jhawar say this is only a rumour.

The two factions have been at odds for a while. A bone of contention is the shareholder agreement. According to Basant and Prashant Jhawar, the agreement should be enforced; the other group says it is not legally valid. A ‘tag and drag’ clause in this says any exit or sale of shares of a Usha Martin group company has to comply with the exit clause therein, which provides for a sale jointly by both promoters (tag along and drag along). It also has no provision of selling to each other.

This stake sale to Tata Steel, if one materialises, would be aside of the deal with Tata Steel for transfer of the steel business that is under process, at an agreed price of Rs 45.25 billion.

Basant and Prashant Jhawar had been pressing for the sale of the entire company (the other business being wire and wire ropes), even while discussion with Tata Steel was on for transfer of the steel business. One reason was that the two businesses were inter-linked. The steel division supplies raw material for the other one.

At the latest board meeting, when it was sought to put a closure to plan for the sale of the wire and wire ropes business, Basant and Prashant Jhawar had dissented, said sources.

With the sale of the steel business, the board had sought to put an end to the issue of the sale of the other one.

Originally, the plan was to sell the wire and wire ropes business but inadequate valuation and an upturn in the steel cycle prompted the company to look for buyers in the latter, instead. The steel business accounts for around 60 per cent of the turnover.

Sources indicated the Basant and Prashant Jhawar faction would want an exit from the company, since they had no executive powers. In 2017, Prashant Jhawar was ousted as non-executive chairman of the board. The meeting was requisitioned by the nominee director of the lead lender.

Prashant Jhawar had taken up enforcement of the shareholder agreement before the National Company Law Tribunal; the next hearing is on November 28. Aside of restrictions on transfer of shares, that agreement also provides for an executive role for both sides of the family. The shareholder agreement was in 2009.