Debt-ridden Usha Martin said Tuesday that the proceeds from the proposed deal with Tata Steel will be used for repaying existing debt, a day after its promoters questioned the end-use of funds.
The founders of Usha Martin Monday had sought details from the board of Usha Martin regarding utilisation of proceeds from the proposed sale of the company's steel business to Tata Steel.
"The board and management of Usha Martin Ltd (UML) are fully committed to the objective of selling its steel business to repay its debts. The board has stipulated that the sale proceeds from transaction will be first used towards discharging the liabilities to lenders.
"The concerns highlighted by Basant Jhawar and Prashant Jhawar regarding any diversion of funds received from Tata Steel towards purchase consideration for acquisition of steel division of UML are refuted as such concerns are unfounded," Usha Martin said in a statement.
The company also said that it is clarified that UML will use the entire consideration (net of transaction costs and taxes, if any received from this sale to discharge liabilities to lenders.
In one of the largest debt resolution plans outside the NCLT process, Tata Steel last week said it had executed definitive agreements for the acquisition of Usha Martin's steel business for Rs 4,300-4,700 crore through a slump sale on a going concern basis.
Usha Martin, which had a debt of over Rs 3,700 crore and a revenue of Rs 3,441 crore in the last fiscal year, had informed the exchanges that the sale would bring down the debt significantly. SBI is the lead banker for the group's debt.
The founders had sought complete transparency in the utilisation of sale proceeds and further details from the board of directors of Usha Martin Ltd.
The two had also said "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," they had said in a statement yesterday.
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