BASANT-PRASHANT JHAWAR MAY SELL MAJORITY SHARES

Basant and Prashant Jhawar, one half of the differing promoter groups in Usha Martin, could sell majority shares of the firm, sources said. The father-son duo has 25.5 per cent of the Usha Martin equity. So does the other group, of Brij and Rajeev Jhawar. It appears Basant and Prashant have evinced an interest in selling 19.9% to Tata Steel. A deal, if it materialises, would be subject to a successful resolution among the key shareholders. ISHITA AYAN DUTT writes

Basant and Prashant Jhawar, one half of the differing promoter groups in Usha Martin, could sell majority shares of the company, sources said.

The father-son duo has 25.5 per cent of the Usha Martin equity. So does the other group, of Brij and Rajeev Jhawar.

It appears Basant and Prashant have evinced interest in selling 19.9 per cent to Tata Steel, which says it has no comment to offer on this subject. Sources close to Prashant Jhawar say this is only a rumour. A deal, if it materialises, would be subject to a successful resolution among the key shareholders. The two factions have been at odds for a while. A bone of contention is the shareholder agreement.

According to Basant and Prashant Jhawar, the agreement should be enforced; the other group believes it is not legally valid. A ‘tag and drag’ clause in this says any exit or sale of shares of a Usha Martin company has to comply with the exit clause therein, which provides for a sale jointly by both promoters (tag along and drag along). It also has no provision of selling to each other.

This stake sale to Tata Steel, believed to have been discussed, would be aside of the deal with Tata Steel for transfer of the steel business that is under process, at an agreed price of ~45.25 billion.

Basant and Prashant Jhawar had been pressing for sale of the entire company (the other business being wire and wire ropes), even while discussion with Tata Steel was on for transfer of the steel business. One reason was that the two businesses were inter-linked. The steel division supplies raw material for the other one.

With sale of the steel business, the board had sought to put an end to the issue of sale of the wire and wire ropes business.

Originally, the plan was to sell the wire and wire ropes business but inadequate valuation and an upturn in the steel cycle prompted the company to look for buyers in the latter, instead. The steel business accounts for around 60 per cent of the turnover.

Sources indicated the Basant and Prashant Jhawar faction would want an exit from the firm, since they had no executive powers. In 2017, Prashant Jhawar was ousted as non-executive chairman of the board. The meeting was requisitioned by the nominee director of the lead lender. Prashant Jhawar had moved the National Company Law Tribunal (NCLT) against his ouster.