Centre approves sale of Neelachal Ispat Nigam to Tata Steel Long Products; privatisation to create new jobs

On Monday, the Cabinet Committee on Economic Affairs comprising of Nitin Gadkari, Union Minister for Road Transport and Highways; Nirmala Sitharaman, Union Minister for Finance & Corporate Affairs and Piyush Goel, Union Minister for Commerce & Industry, has approved the highest bid of Tata Steel Long Products for the privatisation of Neelachal Ispat Nigam Limited (NINL). This is the first instance of privatization of a public sector steel manufacturing enterprise in India.

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NINL is a joint venture of 4 CPSEs, namely MMTC, NMDC, BHEL, MECON and 2 Odisha Govt. PSUs, namely OMC and IPICOL. The committee has approved for 93.71 per cent of shares of Joint Venture partners at the Bid Enterprise Value of Rs. 12,100 crore, as per the release from the Ministry of Finance.

Neelachal Ispat has been running in huge losses and plant is closed since 30.3.2020. The company has huge debt and liabilities exceeding Rs. 6,600 crores as on 31.3.2021, including huge overdues of promoters (Rs 4,116 crore), Banks (Rs 1,741 crore), other creditors and employees.  The company has negative networth of Rs. 3,487 crore and accumulated losses of Rs. 4,228 crore as of 31.3.2021.

Tata Steel Long Products has emerged as H-1 bidder, whose bid has been accepted by the AM. Letter of Intent (LoI)  is being issued to TSLP inviting them to sign the SPA. At this stage, 10 per cent of the bid amount shall be paid by the successful bidder into the Escrow account.

After this transaction, the employees of NINL will continue to be the employees of the company in terms of the Share Purchase Agreement (SPA), which binds the buyer to have a lock-in period of one year. The strategic buyer will also be bound to follow the terms of VRS applicable to CPSEs whenever such a decision is taken.