Debt resolution: Usha Martin promoters seek clarity on fund use from slump sale to Tata Steel

Mumbai: Within days of agreeing to sell their specialty steel business to Tata Steel, promoters of Usha Martin, Basant and Prashant Jhawar, Monday sought transparency on fund utlilisation from the board of the company saying as of now there is no clarity on who’ll get how much from the sale proceeds. In one of the largest debt resolution plans outside the NCLT process, the Usha Martin board had Saturday signed an agreement with Tata Steel to acquire the Kolkata-based steel and wire rope-maker for a cash consideration up to Rs 4,300-4,700 crore. Usha Martin, which had a debt of over Rs 3,700 crore and a revenue of Rs 3,441 crore in the last fiscal year, had informed the exchanges that the sale would bring down the debt significantly. SBI is the lead banker for the group’s debt. The slump sale is a milestone in the six-decade history of the Kolkata-based company and one of the few instances of promoters deleveraging through asset sale. “Though we are encouraged by the Tatas signing an agreement with the current management of Usha Martin, the end use of the funds is opaque,” Usha Martin founder Basant Jhawar and his son Prashant, who together own 25 per cent stake in the company, said in a statement pn Monday. [caption id=“attachment_4065655” align=“alignleft” width=“380”]  Representational image. Reuters.[/caption] But the Jhawars were quick to add that the Tatas’ involvement in their steel business will add value to the stakeholders and that the transaction with Tata Steel is overall a positive development. The company is fighting a takeover and management control battle at the NCLT now. “As 25 per cent 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 the burden falling on residual business is very opaque. “This has created doubts over the transparency and the management accountability. Since no details are on the table, our concern over diversion of funds continues,” they said and sought “complete transparency in fund utilisation” and have sought further details from the board. The deal is expected to be completed over the next two-three quarters. “It is proposed that the steel business of Usha Martin will be acquired subject to transaction closing, for a cash consideration of Rs 4,300-4,700 crore subject to various transaction adjustments,” Tata Steel had said in a statement. Usha Martin’s steel business comprises the specialised one-million tonne alloy-based manufacturing capacity in long products segment in Jamshedpur, a producing iron-ore mine, a coal mine under development and captive power plants. Tata Steel is among the top global steel companies with an annual crude steel capacity of 27.5 million tonne as of March. Usha Martin is amongst the top five wire rope manufacturers in the world and a leading speciality steel producer in the country. In May, Bamnipal Steel, a wholly-owned subsidiary of Tata Steel, completed the acquisition of controlling stake of 72.65 percent in Bhushan Steel, for a consideration of Rs 35,200 crore, though the insolvency auction process. JSW Steel, Liberty Group, Kalyani Steel and Vedanta were also in the fray.