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.