Saraf, AZB play pivotal role in first steel PSU plant privatisation

Saraf & Partners assisted India's first privatisation of steel manufacturing

Saraf & Partners assisted the government’s divestment of a majority stake in Neelachal Ispat Nigam (NINL) in India’s first privatisation of a steel manufacturing public sector undertaking (PSU) company.

The Department of Investment and Public Asset Management (DIPAM) divested its 93.71% stake worth USD1.54 billion in NINL to Tata Steel’s subsidiary Tata Steel Long Products.

Saraf & Partners acted as counsel to DIPAM, led by partner Akshay Jain, along with associates Udyan Arya Shrivastava, Prakhar Mittal and Prarthna Bathija. Mohit Saraf, founder and managing partner, provided strategic input.

“This deal, which is the first successful privatisation of a public sector steel manufacturer and second successful privatisation of a public sector enterprise in recent years, is a critically important milestone towards the government’s policy of divestment of non-strategic public sector enterprises,” Jain told India Business Law Journal.

“As the sole counsel for the government of India and six public sector enterprise sellers, we were instrumental in driving the deal with a unique transaction structure, which is the first of its kind for government divestments. Working on this transaction has been a deeply enriching experience for the team and we are delighted to have been instrumental in achieving a successful completion of the deal,” Jain said.

AZB & Partners acted as legal advisers for Tata Steel with partners Shameek Chaudhuri, Nilanjana Singh, Qais Jamal and Nikunj Maheshwari, along with assistance from senior associates Hitesh Agrawal and Himanshoo Tembe.

“We were privileged to assist Tata Steel in this marquee transaction. We were involved in the whole life cycle of the transaction spanning over 18 months. Given that the government ran this as a bid process, we initially spent considerable time on strategising and structuring to ensure Tata Steel’s offer was the best from legal, commercial and tax perspectives,” AZB’s Chaudhuri told India Business Law Journal.

He added: “In government divestments, such as NINL, there is minimal scope for negotiating the transaction documents or to seek contractual protection from the sellers.”

Jain added: “By providing legally and commercially feasible solutions, we were able to implement the government’s commercial and policy objective of unlocking and maximising the embedded value in the target, which had a dormant plant and significant outstanding liabilities.”

NINL comprises four central public state enterprises: Metals and Minerals Trading Corporation with a 49.78% stake; National Mineral Development Corporation holds 10.10 %; Bharat Heavy Electricals and Metallurgical & Engineering Consultants, each have a 0.68% stake; and two state government PSUs, namely — Odisha Mining Corporation with a 20.47 per cent holding and Industrial Promotion & Investment Corporation of Odisha with a 12% stake.

At Kalinganagar in the eastern state of Odisha, NINL has an integrated steel plant with a capacity of 1.1 million tonnes, which had been shut since 30 March 2020. The company had reported huge losses.