Tata Steel Ltd. has won a race to buy state-run Neelachal Ispat Nigam Ltd. with a bid of 121 billion rupees ($1.6 billion), including debt.
The country’s oldest steel company elbowed out rivals, including JSW Steel Ltd., to buy the mill as domestic producers aggressively seek to raise output to meet booming demand. The deal will also help take Prime Minister Narendra Modi’s government closer to its asset-sale target for the year.
Tata Steel’s unit, Tata Steel Long Products Ltd., will buy a 93.7% stake in Neelachal, which has shuttered its plant since March 2020, the finance ministry said in a statement. The loss-making mill’s debt and liabilities exceeded 66 billion rupees as of March last year, according to the statement.
The disinvestment is part of a privatization drive by the Indian government. In a major boost to its privatization drive, the government last year successfully concluded the sale of Air India Ltd. and formally handed over the charge to Tata Sons Pvt.
The acquisition will be key for Tata Steel Long Products’s growth plans, the company said in a separate statement. It will not only restart the mill but also begin work immediately to build a 4.5 million tons a year plant, with the potential to scale it up to 10 million tons by around the end of the decade. The purchase also gives Tata access to iron ore reserves of around 100 million tons, it said.
The deal will help Tata Steel meet its ambition of doubling annual capacity to as much as 40 million tons by the end of the decade. Neelachal Ispat has a capacity of 1.1 million tons of iron and steel in the eastern state of Odisha, where Tata also has a plant.
The sale will also benefit Neelachal’s biggest stakeholder, MMTC Ltd., which plans to repay some outstanding loans from the proceeds. The government-owned MMTC has a 49.78% stake in the steelmaker.
Shares of MMTC closed nearly 10% higher in Mumbai and Tata Steel Long Products gained 6.2%. Tata Steel ended little changed. – Bloomberg.
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