MMTC, Tata Steel shares jump up to 8%; here’s why

Shares of metals and minerals trading company MMTC and Tata Steel rallied up to 8% in early trade on Tuesday after the strategic disinvestment of Nilachal Ispat Nigam (NINL) was completed on Monday. The government has transferred 93.7% stake in NIML, in which MMTC was the largest shareholder, to Tata Steel Long Products, a subsidiary of Tata Steel. NINL is the second successful privatisation by Prime Minister Narendra Modi-led central government, after national carrier Air India, which was also bought by Tata Group.

Cheering the news, MMTC share price has gained 7.8% to hit a high of ₹42.20 in the first hour of trade so far. The stock opened higher at ₹40.70 against the previous closing price of ₹39.15 on the BSE.

In a similar trend, Tata Steel shares opened higher at ₹862.05 and rose as much as 1.97% to touch a high of ₹871.40 in early deals. Tata Steel Long Products also added 4.1% to ₹596.10 during the session so far.

In January this year, Tata Steel Long Products (TSLP) emerged as the winning bidder for acquiring loss-making NINL, which is a joint venture of 4 state-owned companies - MMTC, NMDC, Bharat Heavy Electricals Ltd (BHEL), MECON - and two Odisha government PSUs - Odisha Mining Corporation (OMC) and Industrial Promotion and Investment Corporation of Odisha (IPICOL).

Tata Steel says the company through its listed subsidiary, TSLP, has completed the acquisition of stake in Neelachal Ispat Nigam. With this, NINL has become a subsidiary of TSLP and an indirect subsidiary of Tata Steel.

The transaction has been completed for a consideration of ₹12,100 crore as per the terms and conditions of the share sale and purchase agreement entered on March 10, 2022 and in accordance with the process being run by Department of Disinvestment & Public Asset Management (DIPAM).

As part of the acquisition, TSLP will subscribe 48,43,75,000 equity shares of face of ₹10 each aggregating to ₹3,100 crore. It will also subscribe 0.01%, 45,60,54,252 non-convertible redeemable preference shares of face value of ₹100 each aggregating to around ₹4,560.54 crore. Besides, TSLP will also purchase 69,40,29,741 equity shares from 4 CPSEs - MMTC, NMDC, BHEL, MECON - and two Odisha government PSUs - OMC and IPICOL.

Located in close proximity to Tata Steel’s facility at Kalinganagar, NINL is a strategic acquisition for the steel major as it provides synergies of shared infrastructure, resources, management etc. and an opportunity to build a dedicated and sustainable long products complex. The company plans to restart the one million tons per annum steel plant expeditiously and also work simultaneously to expand the capacity by building a 4.5 million tons per annum long products complex in the next few years, and further expand it to 10 million tons per annum by 2030.

T. V. Narendran, CEO & Managing Director, Tata Steel, and Chairman, Tata Steel Long Products, says, “Acquisition of Neelachal Ispat Nigam Limited ("NINL") is a historic achievement and a significant milestone towards building a dedicated long products facility for the Tata Steel Group. The completion of the transaction is a testimony to the Government of India’s focus on its disinvestment program. The acquisition also reflects Tata Steel’s commitment to the State of Odisha and the communities around its operations.”

Tata Steel had earlier announced its ambition to increase its capacity to 40 million tons per annum by 2030 in India, and the NINL acquisition strengthens this growth plan over the next decade while providing the enablers to even go beyond the 40 million tons target, it added.