Kolkata: Usha Martin Ltd on Monday said its board has approved a proposal to explore the sale of its steel business, marking a shift in strategy to revive the company.

The company had earlier hired an investment banker to find a buyer for its wire rope business with the aim of paying down debts of around 4,700 crore.

In the light of the revived interest in steel assets, Usha Martin’s lenders are now of the view that it would be more expedient to sell the steel business, said a member of the board, who asked not to be identified. However, the company isn’t immediately halting the search for a buyer for its wire rope business, he added.

Royal Bank of Canada was scouting for buyers for Usha Martin’s wire rope unit. Consulting firm McKinsey and Co. had advised the board on the proposed sale of the business.

Rohit Nanda, chief financial officer of Usha Martin, said the aim is to reduce the company’s debt, and in view of the “improved scenario" in steel, the board has decided that a potential sale of the steel business should be explored. The company will hire external advisers to “evaluate proposals and oversee the process" to sell the division, Usha Martin said in a regulatory filing.

On Monday, Usha Martin’s shares jumped 4.6% to 29.50 on the BSE.

The company’s board has always been of the view that wire rope is the core strength of Usha Martin, which is one of the global leaders in the business, said the unnamed director cited above. But until now, the board was sceptical about the chances of finding a buyer for the steel business, he added.

It was earlier determined through consultation with McKinsey that if the wire rope business could be sold at an “optimal price", the steel business could be nursed back to health by repaying debts with the sale proceeds, according to this person.

But now, looking at the interest taken by leading steel makers such as Tata Steel Ltd and ArcelorMittal SA in distressed assets, the opposite is being explored, he added.

Usha Martin’s steel division contributed 3,421.19 crore, or 60.77% of the company’s revenue from operations of 5,629.09 in fiscal 2017-18, without adjusting for internal sales between business divisions. Operating profit from the segment in the year till March was 99.78 crore.

The wire rope division with revenue of 2,080.62 crore, however, is more profitable and contributed 234.77 crore towards operating profit in 2017-18.

The company, however, posted a loss of 267.95 crore in 2017-18, compared with Rs357.56 crore in the previous year. Usha Martin paid 586.98 crore in interest outstanding loans during 2017-18 as against 564.24 crore in the previous year.

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