The wire ropes business of Usha Martin Ltd. (UML) will get rejuvenated after the completion of the transaction relating to the sale of UML’s steel business to the Tatas.
Holding out this assurance before the company’s minority shareholders at an extraordinary general meeting , UML managing director Rajeev Jhawar said that the wire rope business’ cash flow will improve with the release of stress on its balance sheet on account of its debt.
A residual debt of about ₹400 crore would remain with UML after settling its debt of ₹4,700 crore, said Rohit Nanda, UML’s chief financial officer. “The wire ropes business should be able to sustain this debt,” Mr. Jhawar said, adding that UML would seek a long-term (five-year) supply contract with Tata Steel for wire rods. “This is very important for stable running of wire ropes business,” he said.
The UML board had, in its September 2018 meeting, approved the sale of the steel business to Tata Steel for ₹4,525 crore.
Sale of land
It was learnt that the company had also sold a 115-acre land parcel, belonging to UM Cables, to the Tatas in Jamshedpur. The steel business is located on 470 acre.
UML chairman G. N. Bajpai, who chaired Saturday’s meeting, said that the sale proceeds would be deposited in an escrow account with the State Bank of India
Mr. Nanda told the media later that investments in wire ropes would be made gradually. The business had suffered in the past due to the downturn in sectors like oil where thick ropes were needed for the rigs. To a query, he said that present capacity utilisation was about 70%.
Shareholders, some of whom have been with UML for quarter a century, wanted to know the contours of the deal, some expressing anguish at the sale being made at a time when the steel industry was turning around. They all demanded a factory visit before the final handover.