Rajeev Jhawar, the saviour of debt struck Usha Martin
Rajeev Jhawar is the son of Brij Kishore Jhawar. He has been the Managing Director at Usha Martin Limited since May 19, 2008. He is the Director of Neutral Publishing House Ltd. Usha Martin Limited had gone through turmoil with a huge debt burden and a family feud for several years. After hiving off its steel division to Tata in 2019 and clearing most of its debts, the company now sees itself in a reasonably healthy position. The current debt of the company, including the working capital, is now merely Rs582 crore, as against Rs4,600 crore in 2018-19.
Tata Steel manufacturing under Usha Martin which has a debt of over 4600 dot core-based is selling its steel business to Tata Steel for a total cost of close to around 4600 crore rupees which will help it wipe off its entire debt. Therefore, strengthening their balance sheet to remain focused on the mainstay business of wire rope business.
it’s a good transaction but many things need to be understood. The deal is not yet a done deal because it requires the shareholder’s permission as well. As far as Usha Martin is concerned remember there’s another faction of the promoter group for twenty-five and a half per cent stake which has raised certain questions about this particular transaction where 75% of the total shareholders vote
According to Rajeev Jhawar, the total debt is around 4500 to 4600 crores including the long term as well as all the working capital. With the transaction with TATA steel, the company is expected to repay almost all its debt. The wire rope will have a very strong residual company with a very strong balance sheet with an annual profit between 250 to 300 crores on a consolidated basis. Rajeev feels that this is a business that can grow Usha Martin has been a global leader. In wire group business, Usha Martin has the leadership position in the country and they are among the top 4 players in the world. In the past 3 or 4 years, the company could not invest in this business because of its over-leveraged position. By selling the steel plant, Rajeev Jhawar Usha Martin expects that they will be able to expand their wire rope and wire business as there would be very good cash flows generated.
Rajeev, jhawar feels that going to be a debt-free company, with the global leader in the wire rope business they have the opportunity to have good growth over the next 3,4 years. They also expect good growth both in terms of a top line and bottom line.
Rajeev would wish a growth of at least 15 to 20% per year. It may take a year to build up the capacities in these areas. After that he is sure, that would be a then ongoing basis. They can expand and grow at this rate over the next few years.
Rajeev Jhawar also points out that 60% of their revenues are going in terms of EBITDA. The steel cycle has improved and over the last 2 quarters, the company has had a turnaround. It has been able to improve its bottom line both in the steel and wire rope business. Rajeev, Jhawar thought that it would be a good opportunity to sell the steel business at these levels so that they can get a better valuation. This along with a better balance sheet, they have a solid rope business that can grow.
The company never had any default. Usha Martin has been able to meet all its commitments to its lenders. There are no provisions that have been made by the lenders and they have been current on their repayments of both interest and principle. Their main lenders are SBI, ICICI, the axis along with a few others and they are very happy to see that the company has proactively taken this step and would be able to clear all its debt. Rajeev, Jhawar expects that going forward it would continue to add value to its shareholders.
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