A section of the promoter family of Usha Martin Ltd.(UML) has raised concerns over the end-use of the funds received from sale of the company’s steel business to Tata Steel.
Mr. B.K. Jhawar and his son Mr. Prashant Jhawar who together hold 25% of UMLs equity said: “Since no details are available on the table, our concern about diversion of funds continues.”
Positive development
In a press statement here, they said that Tata’s business pact with UML’s current management was an encouraging and a positive development as their involvement with UML’s steel business would add value to the stakeholders .
“But the end-use of funds is opaque and as 25% shareholders, we are concerned about the liabilities which will fall in residual business and its capacity to service the same .. 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 burden falling in residual business is very opaque.
Doubts on transparency
“No details are available, creating doubt over transparency and management accountability,” Mr B.K. Jhawar and Prasant Jhawar said. They said that further details had been sought from the UML board.
Mr. Prasant Jhawar was removed from chairmanship of the speciality steel-maker’s board in April 2017 (his father is the chairman emeritus) with G. N. Bajpai being appointed as the non-executive chairman. The proposal was put forth by a nominee director of the lenders. While the promoters’ group holds 51.3 % of UML’s equity (the balance is held by Rajeev Jhawar who is Mr. B. K. Jhawar’s nephew) the rest is held by public including the financial sector.
As on March 31, 2018, UML had a ₹4,600 crore debt on a consolidated turnover of ₹4,767 crore of which ₹3,441 crore was from its steel business. Tata Steel had proposed to buy the one million tonne steel business for a cash consideration of between ₹4,300 crore and ₹4,700 crore.
