Odisha govt looks to sell minority stake in loss-making Neelachal Ispat

As the Centre contemplates options to revive the loss-making Neelachal Ispat Nigam Ltd (NINL) through a merger, or divestment, the Odisha government, one of the minority stakeholders in the steel entity, is weighing options to exit it.

MMTC, a trading firm under the Union ministry of commerce and industry, is the largest stakeholder in NINL with an equity of 49.9 per cent. The Odisha government via its two undertakings - Odisha Mining Corporation (OMC) and Industrial Promotion & Investment Corporation of Odisha Ltd (Ipicol), owns 26 per cent stake. NINL has been consistently piling up losses for the past five years. In the last fiscal, the state-controlled player showed signs of a turnaround by registering profit at the operational level.

“Over the past few years, NINL's financial performance has been underwhelming. We have minority equity participation in the company and don't have much say in its management. We don't feel its prudent to stay invested in NINL although a decision is not firmed up yet. MMTC being the largest stakeholder should take the call. The revival of NINL needs sizeable investments and given its stressed finances, the steel PSU is constrained to work on its own”, said a state government official.

NINL is one of the 200-odd state-level public enterprises (SLPEs) across the country that are bedeviled with losses. The Union government is taking stock of the fate of its investment through central public sector enterprises (CPSEs) in such loss-ridden units. If initial talks are any indicator, the CPSEs now have the latitude to sell off their stakes in state controlled units where investments have turned infructuous.

The roadmap to revival of loss incurring SLPEs like NINL is still nebulous. The plan to get the SLPEs back in the black is left to the central ministries under whose administrative control the enterprises fall. While the central government may not directly pocket the proceeds of divestment of such firms, it is seen as helping the CPSEs to rid themselves of historical investments locked in them.

In NINL, CPSEs - NMDC and BHEL Ltd own minority stakes. NINL's chairman Ved Prakash could not be contacted for comments.

NINL has had a chequered history of merger plans and hostile takeover bids by bigger public sector firms. One of the proposals - NINL's merger with Rashtriya Ispat Nigam Ltd (RINL)- was shelved in 2012 after MMTC, the lead promoter, spurned the offer. RINL's merger with NINL is putatively doing the rounds again with Dharmendra Pradhan being assigned the Ministry of Steel after BJP-led NDA's resounding win in 2019 polls. 

However, even before RINL, maharatna steel company Steel Authority of India Ltd (SAIL) has been making abortive bids to acquire stake in NINL. SAIL’s bid to acquire stake in NINL dates back to July 2005 when a committee of secretaries (CoS) had recommended the merger of NINL with SAIL according to a proposal by the steel ministry. 

In February 2014, the steel ministry revived its proposal for SAIL acquiring majority stake in NINL, stating that SAIL was best suited to utilise the existing facilities at NINL and help to achieve its full potential. But, the department of disinvestment opposed the proposal, saying that any move to coercively take away the shares of MMTC held in NINL was unjustified and was also not legally tenable according to Company Law. 

A source close to the development said that NINL needs Rs 1,700 crore capital infusion to turn the tide. NINL has already treaded on the turnaround trail in FY19 with the successful completion of the blast furnace capital repair work in April, 2018. It has also diversified into billets and TMT bar production to shore up margins. NINL operates 1.1 million tonne steel plant at Duburi within Odisha's Kalinganagar Industrial Complex.