The Basant-Prashant Jhawar promoter faction of Usha Martin, having 25.5 per cent of the equity, did not give their consent at the meeting on Saturday of the board of directors to Tata Steel’s offer for acquiring the company’s steel business for an amount of up to Rs 47 billion.
Basant Kumar and son Prashant Jhawar had joined the meeting over a video conference. Six independent directors, the State Bank of India nominee, the managing director and the joint managing director consented, said sources close to the company.
The father-son duo had earlier raised various issues on the use of funds and how the dues to unsecured creditors, employees and pending liability to the exchequer would be met.
A source close to the company said the final offer was made at 6 am and was valid till 4 pm.
Brij Jhawar and his son, Rajeev Jhawar, currently the managing director, are one of the two promoter groups. Chairman emeritus Basant Kumar Jhawar and his son, Prashant Jhawar, are on the other side. They have battled for a while over Usha Martin. Both have the same share, of 25.5 per cent, in the company, the most prized entity in the group. Both Prashant and Rajeev Jhawar did not comment on the matter.
Informed sources said the resolution would be finally placed before the shareholders for approval. Institutions hold around 10.8 per cent in the company, according to the shareholding pattern filed with the stock exchanges.
The sources said the deal would not entail any loan write-off by lenders. Transfer of the business to Tata Steel would be in return for Rs 43-47 billion. “Even at the lower band of Rs 43 billion, it would nearly deleverage Usha Martin. It would cover Rs 30 billion of term loan and around Rs 13 billion of the Rs 15 billion working capital loan. The balance Rs 2 billion can be serviced by the wire ropes business, which is Ebitda-positive,” said sources. Ebitda is jargon for operating profit.
The board passed the resolution with a majority, after investment bankers said this was the best possible offer under current market conditions. In June, Usha Martin had appointed SBI Capital Markets and Arpwood Capital to find buyers for the company.
“The deal was done in a record time of 99 days,” sources added. Tata Steel’s total investment after meeting stamp duty charges and capacity ramp-up to a million tonnes yearly (from 650,000 tonnes now) is pegged at Rs 68.5 billion.
The main objective of the transaction was to deleverage Usha Martin’s balance sheet and ensure no job loss. All employees pertaining to the steel business would be transferred as part of the acquisition, Tata Steel said on Saturday.