Ferro Scrap sale likely to conclude in second quarter

Strategic disinvestment of Ferro Scrap Nigam Ltd— a 100% subsidiary of MSTC Ltd—has “entered the last leg" with the finalisation of the draft share purchase agreement based on the recommendations of an inter ministerial group, according to two officials aware of the development.

“The government will now invite financial bids and winning bidder would be approved by a core group of secretaries. Disinvestment of FSNL may be completed in the second quarter of current fiscal," one of the officials said, asking not to be named.

The government backed company had got multiple bids as of June last year, following the first calls for expression of interest. Bidders had sought clarity on employee protection and other conditions such as business continuity, asset stripping, lock-in of the shares acquired in the proposed transaction, and shareholding of consortium members in the special purpose vehicle.

FSNL is a Mini Ratna II CPSE, a 100% subsidiary of MSTC, incorporated in 1979 to provide steel mill services including processing steel mills slag for recovery of iron scrap and other metallics. The company has an authorized capital of ₹50 crore as on 31 March 2021, and paid-up share capital of ₹32 crore. The entire paid-up capital is held by MSTC.

The company has nine steel plants in India, and specializes in the recovery and processing of scrap from slag and refuse generated during iron and steel making across different steel plants. It offers services for dig and haul of blast furnaces and steel melting shop slag at slag yards, processing of iron and steel skulls, mill rejects and maintenance scrap as per the specific requirements of its customers.

FSNL has become the largest recycler in India in terms of the volume of scrap and slag handled across multiple plants. For FY21, the company had revenue of ₹352.74 crore and profit of ₹22.75 crore. For the quarter ended September 2021, revenue was ₹101.78 crore and profit was ₹10.63 crore.

As on 30 September 2021, FSNL has a cash balance of ₹169.9 crore along with zero debt servicing obligation for the company, according to the preliminary information memorandum issued by the government.

Proceeds of the disinvestment will flow into the FY24, where the government has set a target of ₹50,000 crore.

The Cabinet Committee on Economic Affairs had on 27 October 2016 given ‘in-principle’ approval to disinvest entire equity shareholding held through MSTC in FSNL, through strategic disinvestment and transfer of management control.