The Competition Commission has cleared Tata Sponge Iron’s acquisition of steel business of Usha Martin.
In October, Tata Steel had said its subsidiary, Tata Sponge Iron Ltd (TSIL), will acquire Usha Martin Ltd (UML) between Rs 4,300-4,700 crore, subject to various transaction adjustments.
With the acquisition, TSIL will enter the steel business.
The CCI in a tweet on Tuesday said it “approves acquisition of steel division of Usha Martin Limited by Tata Sponge Iron Limited”.
Deals beyond a certain threshold require approval from the Competition Commission of India (CCI).
Earlier, UML had said the sale of steel business to Tata Steel will help the company in “significant reduction” of its debt.
UML’s steel business comprises the specialised 1 mtpa alloy based manufacturing capacity in long products segment based in Jamshedpur, a producing iron-ore mine, a coal mine under development and captive power plants.
Tata Steel Group is among the top global steel companies with an annual crude steel capacity of 27.5 million tonnes per annum (mtpa) as on March 31, 2018.
Usha Martin is amongst the largest wire rope manufacturers in the world and a leading speciality steel producer in India.
Tata Steel had said that long products comprise an important part of the overall market for steel and demand for them in India, is expected to grow significantly in the future, especially in value-added customer segments like construction, automotive and engineering.
Tata Sponge has a debt-free capital structure and free cash reserves of around Rs 670 crore and it is therefore ideally placed to enter steel manufacturing with a focus on the attractive speciality long products portfolio.
The Board of TSIL said it would raise financing by way of a combination or part of rights issuance (up to Rs 1,800 crore), external borrowings (up to Rs 2,500 crore), and issuance of non-convertible redeemable preference shares (up to Rs 1,000 crore)
Tata Steel further said it has noted the financing plan and confirmed its support, in-principle to the overall financing structure.
Earlier in May, Bamnipal Steel Ltd, a wholly owned subsidiary of Tata Steel, had acquired a controlling stake of 72.65% in Bhushan Steel Ltd (BSL).
ADDING CAPACITY
- Rs 670 cr – free cash reserves with Tata Sponge
- Rs 2,500 cr – debt Tata Sponge plans to take for the buy
- 27.5 mt – Tata Steel’s annual capacity
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