In spite of being in a cut-throat business environment, the TATA group is well known for its adherence to service to the nation. After rescuing AIR India, the TATA group has given new life to Nilanchal Ispat Nigam Ltd.
TATA buys NINL
On Monday, 31st January, the Modi government approved the sale of Neelachal Ispat Nigam Limited (NINL) to Tata Steel Long Products (TSLP), a subsidiary of Tata Steel. Three companies had submitted their bids for buying NINL. A consortium of Jindal Steel & Power Limited and Nalwa Steel and Power Ltd; JSW Steel Limited were two other companies in the race.
TSLP emerged as the H-1 bidder with the highest bidding price. TATA group will be putting Rs 12,100 crores in government coffers for 93.71 percent shares of NINL. Initially, the TATA group will be putting Rs 1210 crore (i.e. 10 percent) in an escrow account, a third party account where funds are kept before they are transferred to the ultimate party.
An official release by the government of India read, “The highest bid of M/s Tata Steel Long Products Limited for 93.71 percent of shares of Joint Venture partners of 4 CPSEs and 2 Odisha Govt State PSEs at the Bid Enterprise Value of Rs 12,100 crore,”
NINL was a huge burden
Up until now, NINL had been owned and operated by the Government of India. Operating companies by governments is a socialist era need, which no longer is relevant. Companies run by government bureaucracy have become a burden on the government due to their inefficiencies. The financial statements of NINL before their disinvestment by the Modi government are concrete examples of this phenomenon.
Currently, NINL is mired by debt as it has to pay a total of Rs 6,600 to its creditors. In fact, out of Rs 6,600 crores, more than Rs 4,100 crores is to be paid to its own promoters. The company’s accumulated loss is well over Rs 4,228 crore while its net worth is negative Rs 3,487 crores. So, basically, liabilities on NINL are worth Rs 3,487 crores more than its assets.
TATA Group-Rescuer in Chief
This is not the first time TATA has come to rescue a loss-making public sector enterprise. In September last year, the government of India finally took the monumental step of unloading the loss-making national carrier Air India to the highest bidder. The Tata Group emerged as the winner to acquire the airline with its Rs 18,000 crore bid.
Read more: Tata to purchase Air India: The start of a revolution in Indian aviation
Public sector enterprises (PSEs) are causing more damage than good to India’s growth story. This is the reason why the government is getting rid of them. Big business houses like TATA Group coming forward to handle these PSEs are positive signs for the nation’s development.