Kolkata-based steel maker Usha Martin Ltd on Tuesday said its board has okayed the sale of its steel division in order to pare debt.
Usha Martin, which has a net debt of Rs 3,718 crore, saw its stock touch a 52-week intraday high on the BSE at Rs 33 after the announcement.
For the other division relating to wire ropes, which forms the company's mainstay, Usha Martin had appointed a consultant last year to evaluate the possibility of its sale.
The board’s clearance announced on Tuesday comes in the wake of renewed interest in steel assets.
Leading steel makers such as Tata Steel Ltd and ArcelorMittal SA are eyeing distressed assets and Usha Martin’s lenders feel that, given the turnaround in the steel business cycle, it would be more convenient to sell the steel business, according to a Mint report, citing an unnamed board member.
For the sale of the steel unit, the firm on Tuesday said its board has formed a panel of independent directors to appoint investment banks, consultants and advisers for evaluating buyout proposals and overseeing the process.
Usha Martin’s steel division accounted for ₹3,421 crore, or 60.77% of the company’s revenue from operations for 2017-18, without adjusting for sales between business divisions. Operating profit from the segment was ₹99.78 crore for the period. The wire rope division, with revenue of ₹2,080.62 crore, accounted for 37% of the company’s revenue from operations for 2017-18. The division is more profitable and contributed ₹234.77 crore towards operating profit in 2017-18.
Usha Martin’s consolidated net sales stood at Rs 4,657.8 crore for 2017-18, up from Rs 3,882 crore a year earlier. The company's net loss was Rs 271 crore for 2017-18 as against Rs 359 crore a year earlier. Usha Martin paid ₹586.98 crore in interest on outstanding loans during 2017-18 as against ₹564.24 crore in the previous year.
The whole company, including the two divisions, is being eyed by JSW Steel, Tata Steel and Vedanta, The Hindu BusinessLine reported last week. Tata Steel has placed an aggressive bid of Rs 6,000 crore to acquire Usha Martin, the report said, adding that the promoters are selling the steel business to pare the Usha Martin Group’s debt.
The company, with steel and wire rope divisions, has an integrated plant near Jamshedpur producing a wide range of speciality steel, wire rods and bars. It also has a captive iron ore mine at Barajamda in Jharkhand.
Usha Martin is a mid-sized steel manufacturer with saleable steel capacity of around one million tonnes per year, according to a report by CARE Ratings.
The company has a global base of wire rope manufacturing, with facilities in India, the United Kingdom, Dubai, and Bangkok.