Tata-Usha Martin deal: Give more clarity on end use of funds, say Jhawars

Tata Steel had signed a definitive agreement with Usha Martin on Saturday for the acquisition of its steel business

Days after agreeing to sell its speciality steel business to Tata Steel, Basant-Prashant Jhawar faction of Usha Martin promoters on Monday sought further details from the board of the company on the utilisation of sale proceeds.

A statement issued by the father-son duo said: “Tatas are an excellent business house and their involvement in the steel business of Usha Martin will add value to the stakeholders and that the transaction with Tata Steel is an overall positive development. We are encouraged by Tatas signing a business agreement with the current management of Usha Martin Limited.”

The statement, however, said the end use of the funds was opaque.  “As 25 per cent shareholders, we are concerned about the liabilities, which will fall on the residual business and its capacity to service the same. No details are available. How much of the term loans, working capital, liabilities to unsecured creditors and other liabilities will be cleared and how much will be carried forward with the burden falling on residual business is very opaque,” it said.

“No details are available, creating doubt over transparency and management accountability. Since no details are on the table our concern over diversion of funds continues,” the statement added. 

On Saturday, Tata Steel signed a definitive agreement with Usha Martin for the acquisition of its steel business through a slump sale on a going concern basis for an amount up to Rs 47 billion. 

Basant Jhawar and Prashant Jhawar, however, had not given consent to the Tata agreement at the board meeting. Jhawars and the other promoter faction — Brij Jhawar and his son, Rajeev Jhawar, currently the managing director — have been at odds over Usha Martin for a while now. Both the factions have an equal shareholding.