Kolkata: Prashant Jhawar and Rajeev Jhawar, co-promoters of Usha Martin Ltd, have for now put aside their differences over the sale of the company’s steel business and cleared the deck for its takeover by Tata Sponge Iron Ltd. Prashant Jhawar, who along with his father Basant Kumar Jhawar owns 25.5% in Usha Martin, on Monday issued a statement saying he would vote in favour of the proposed sale of the unit at the shareholders’ meeting on 10 November. “We have also conveyed our decision to the lead banker—State Bank of India," Prashant Jhawar said.
The company’s shares on Monday closed at ₹ 26.50 on BSE, down 3.28% in a flat market.
In April 2017, Prashant Jhawar was ousted as non-executive chairman by the company’s lenders and has since been fighting legal battles against his cousin Rajeev Jhawar, who continues to be the managing director.
In September this year, the Tata group agreed to acquire Usha Martin’s 1 million tonne steel unit for ₹ 4,500 crore, adjusted for working capital deployed at the time of closure of the transaction.
The steel business includes iron ore and coal mines in Jharkhand, which are also to be transferred to the Tata group.
The cash generated from the proposed sale will be used to repay Usha Martin’s debts. The company’s wire-rope division will then be indebted to the tune of ₹ 300-400 crore, which it can “easily service" from its cash flow, said a company official, who asked not to be named.
Usha Martin produces around 150,000 tonnes of wire rope a year.
Prashant Jhawar said though he has agreed to support the sale of the steel unit, his “concerns" over utilisation of the sale proceeds such as clearing so-called contingent liabilities to the tune of ₹ 860 crore “remain unaddressed".
These liabilities include claims made by the state government of Jharkhand because of “irregularities in mining operations allegedly carried out by the present management," he said.
London-based Prashant Jhawar, who has distanced himself from the day-to-day operations of Usha Martin, appears to have realised that the sale of the steel unit will benefit all stakeholders, said the company executive cited above.
Usha Martin had earlier planned to sell its wire-rope division and keep the steel unit.
It had even engaged Royal Bank of Canada as an investment banker to advise it on the sale of the unit.
Although the management has always held the more profitable wire-rope division as the company’s core strength, the board was initially skeptical about finding a buyer for it.
In June, Usha Martin’s board agreed to explore the sale of the steel unit looking at the interest shown in distressed assets by companies such as Tata Steel Ltd and ArcelorMittal SA.
With Prashant Jhawar coming around, the proposal to sell the steel unit is expected to get shareholders’ approval, according to the executive cited above.
The company now needs regulatory clearance from the Jharkhand government and the central government to conclude the deal.
This may take four to five months, added the person quoted above.