Usha Martin founder seeks details on end-use of funds from Tata Steel deal

Usha Martin founders have sought details from the board regarding utilisation of proceeds from the proposed sale of the company's steel business to Tata Steel.

Tata Steel last week said it had executed definitive agreements for the acquisition of Usha Martin's steel business for Rs 4,300-4,700 crore through a slump sale on a going concern basis.

Usha Martin founder Basant Jhawar and his son Prashant Jhawar in a statement said that there was no clarity on end-use of sale proceeds.

"Since no details are on the table our concern over diversion of funds continues. Therefore we seek complete transparency in the utilisation of sale proceeds and have sought further details from the board of directors of Usha Martin Ltd," the statement said.

The founders, however, welcomed the deal with Tatas, saying the group's involvement in the steel business of Usha Martin will add value to the stakeholders and the transaction is overall a positive development.

Basant Jhawar is at present Founder Director of Usha Martin while his son is one of the directors of the company.

"We are encouraged by Tatas signing a business agreement with the current management of Usha Martin Ltd. But the end use of the funds is opaque," the statement said.

"As 25 percent shareholders, we are concerned about the liabilities which will fall on the residual business and its capacity to service the same. No details are available.

"How much of the term loans, working capital, liabilities to unsecured creditors and other liabilities will be cleared and how much will be carried forward with burden falling on residual business is very opaque. No details are available, creating doubt over transparency and management accountability," the statement added.

Tata Steel had announced last week that it will acquire the steel business of Usha Martin Ltd (UML).

UML, in a stock exchange filing, had said that the sale of steel business to Tata Steel will help the company in "significant reduction" of its debt.

The deal is expected to complete in 6-9 months, it had added.

UML's steel business comprises the specialised one million tonnes per annum (MTPA) alloy based manufacturing capacity in long products segment based in Jamshedpur, a producing iron-ore mine, a coal mine under development and captive power plants, Tata Steel said.

It is amongst the largest wire rope manufacturers in the world and a leading speciality steel producer in India.