Neelachal Ispat: losses scale high, minority holders to stay

The government has informed potential private bidders for ailing steel company Neelachal Ispat Nigam Limited (NINL) that lenders and other entities holding a 6.29% stake in the company will neither infuse any funds nor offload their shares in the firm as part of the privatisation process.

The Department of Investment and Public Asset Management (DIPAM) in the Finance Ministry has also told bidders that no shareholder agreement is available for partly paid shares worth 0.94% held by the firm’s past vendors — G. A. Danieli India Ltd. and SMS India Pvt. Ltd. — since 1999-2000. It has also said these shares would not be sold, in response to a query from bidders whether these holdings could be bought or cancelled.

The government has invited expressions of interest to offload 93.71% stake held in NINL held by MMTC, the Industrial Promotion & Investment Corporation of Odisha, Odisha Mining Corporation, NMDC, MECON and BHEL, till March 29. Set up in 1982, NINL has been incurring losses since 2012-13.

As per the latest annual report for 2019-20 shared with bidders this week, the firm’s losses hit a record ₹1,758 crore in the year from ₹401.45 crore in 2018-19. As per preliminary information provided to bidders in January, the firm had incurred a loss of ₹826.73 crore in the first nine months of 2019-20.

Bidders have asked the government about the plans for the 5.35% residual stake held mainly by 11 state-owned financial entities including LIC, IDBI Bank and Central Bank of India — allotted as part of a corporate debt restructuring exercise in 2004-05 — and another 0.94% stake held by the two holders of partly paid up shares.

The loss-making firm’s liabilities would be cleared from the disinvestment proceeds and provide unfair gains to these minority shareholders without their infusing any capital, they have pointed out. ‘Sensibly, either the remaining 6.29% shares should also come under divestment or they should proportionally infuse capital since their role (as a post-process shareholder) in the process is similar to the interest bidder,’ bidders have noted.

“The said shares are not a part of the current disinvestment process and would continue to be shareholders post disinvestment. No infusion of capital from the remaining 6.29% of shareholders is envisaged to settle the liabilities of NINL,” the government has said.

Incidentally, NINL has submitted a fresh debt restructuring plan to banks in December 2020, which includes a request for a fresh ₹350 crore funding to start up its plant and mines operations. “The same is under consideration by lenders,” DIPAM has conveyed to bidders. An NOC has also been sought from the lenders for the disinvestment process.

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Printable version | Sep 19, 2022 12:51:57 am |