India: Modern Steels in talks with Asian PE firm ADV for a slump sale

India Gate. Photo: Abhidev Vaishnav/unsplash

Modern Steels Ltd is in advanced discussions to sell its entire operations on a slump sale basis to Asian private equity firm ADV Partners, said two people aware of the talks.

The transaction is expected to be worth 120-130 crore and is likely to close this month, said the people cited above, requesting anonymity.

Chandigarh-based Modern Steels manufactures special and alloy steel, especially for the automotive sector, stainless steel and bright bars, and has an annual capacity of 150,000 tonnes. The company was classified as a non-performing asset (NPA) in 2018 by its lenders State Bank of India, Canara Bank and Punjab National Bank (PNB) in 2018.

Subsequently, the first two lenders sold their outstanding debt to Edelweiss’s asset reconstruction arm. PNB still retains its exposure to the company.

“The promoters are talking to two to three investors for a settlement, but ADV is ahead in the race,” the first person said.

“The lenders tried to get the case admitted under the Insolvency and Bankruptcy Code in 2018, but that has been held up because of delays in court. The company has been struggling for working capital and it owed about 400-odd crore to banks when it was first declared an NPA. Even at the current sale value, lenders will have to take a significant haircut on their exposure.”

For ADV Partners, this will mark its second acquisition of a steel company in India. In January 2019, the PE firm bought out Gerdau Steel India from Brazilian conglomerate Gerdau SA for $120 million. Gerdau India has since been renamed Arjas Steel and operates a 300,000-tonne special steel plant in Tadipatri, Andhra Pradesh, besides two captive power plants.

The facility supplies primarily to the automotive, defence and railways sectors.

In the September quarter, Modern Steels reported a net loss of 8.58 crore on revenue of 20.19 crore, similar to the 8.11 crore loss it reported a year earlier. Last fiscal, the company had reported a loss of 49.39 crore on revenue of 211 crore.

This article was first published on livemint.com.

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.