Tata Steel will take control of Neelachal Ispat Nigam after bidding Rs.12,100 crore, including equity and debt, the government said on Monday. The unit of Tata Sons plans to make Neelachal’s Odisha facility, currently defunct, the hub for its long steel business in the future. Long steel products refer to rods, rails and bars used in the construction sector.
The deal comes hot on the heels of Tata Sons acquiring Air India from the government through the privatisation process. The M&A is in line with Tata Steel’s strategy of doubling down on the India business after selling some unprofitable overseas ventures. In 2018, it had acquired Bhushan Steel for Rs 35,200 crore, the largest M&A under Tata Steel chairman N Chandrasekaran (who is also the chairman of Tata Sons) — the first India consolidation move as part of that strategy.
On Monday, the government said it has approved the highest bid of Tata Steel Long Products, a unit of the $21-billion Tata Steel, for a 94% stake in the loss-making Neelachal at an enterprise value of Rs 12,100 crore. Besides Tata Steel, billionaire industrialist Sajjan Jindal-controlled JSW Steel and a grouping of Jindal Steel & Power (owned by Sajjan’s younger brother Naveen Jindal) and Nalwa Steel & Power submitted financial bids for Neelachal.
Tata Steel will have to pay 10% of the bid amount when it signs the share purchase agreement. Neelachal’s debt exceeded Rs 6,600 crore, while its accumulated losses was Rs 4,228 crore as on March 31, 2021. This is the first instance of privatisation of a public sector steel manufacturing enterprise in India.