Usha Martin-Tata deal gets promoters’ nod

Basant Jhawar, chairman emeritus, and Prashant Jhawar, his son and former chairman of Usha Martin, who had not given consent during the boardmeeting that approved the sale of the steel business to Tata Steel, have decided to support the resolution at the forthcoming shareholders’ meeting.

Together they own 25.5 percent of the equity in the firm.

The shareholders’ meet is on November 10.The resolution is being placed as a special business item; this would require 75 per cent of the votes. The father-son’s support, therefore, is needed for the deal to go through.

Prashant Jhawar has stated, “We had earlier welcomed the possible involvement of the Tatas in the management of Usha Martin’s steel division, resulting in value for all stakeholders. To facilitate this, we have instructed our lawyers to support the resolution for the sale... to Tata Sponge Iron Ltd (TSIL), at the coming shareholders’ meeting. We have also conveyed our decision to the lead banker, SBI.” TSIL is the formal entity being used for the acquisition.

The Jhawar duo had, days after the agreement with Tata Steel, said they welcomed the latter group but had raised concern about the utilisation of funds from the sale — the agreed price was ~45.25 billion.

The Basant-Prashant Jhawar faction and the Brij-Rajeev Jhawar faction have equal shareholding in the company. They have been at odds for a while. Rajeev Jhawar is the current managing director.

Prashant Jhawar said onMonday that support to deal was being extended

even though the concerns raised still remain. “We are doing this even though our concerns over specific utilisation of sales proceeds towards repayment of term loan, working capital, unsecured/operating creditors and, the contingent liabilities in the residual business remain unaddressed,” he said.

Adding, “The contingent liabilities listed total circa ~8.6 billion, including claims from the Jharkhand government pertaining to irregularities in the mining, allegedly carried out by the present management... We believe, should such claims require settlement, it may result in additional debt being loaded on to the residual business. It would be in the best interest of all stakeholders if the management and the board come out with specific plans to find a resolution. Our concern on the above, as well as possible diversion of funds, remains unaddressed.” However, went the statement, “We are pleased to extend a warm welcome to the reputed house of Tatas to run the steel division founded by my father, Basant Kumar Jhawar.”