L&T to own 100% of LTSSHF; to buy NPCIL stake

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L&T to own 100% of LTSSHF; to buy NPCIL stake

L&T to own 100% of LTSSHF; to buy NPCIL stake

Industry News
May 22,24

A delay in equity infusion by the promoters, led to the net worth of LTSSHF to fall to negative Rs 25.73 billion as of March 31, 2023.

L&T to own 100% of LTSSHF; to buy NPCIL stake

After years of delays, the government will likely soon give the green signal to the Nuclear Power Corporation of India (NPCI) to sell its 26% stake in L&T Special Steels and Heavy Forgings (LTSSHF) to the majority partner, L&T.

As per sources, even though, LTSSHF has a negative net worth due to continuous losses over the years, L&T could still be willing to pay ?1.70 billion, equivalent to NPCI’s principal loan amount to LTSSHF. L&T already owns 74% of LTSSHF.

Due to a delay in equity infusion by the promoters, the net worth of LTSSHF fell to negative (-) Rs 25.73 billion as of March 31, 2023.

The new government at the Centre, which will assume office after the general elections, will take the final call on the transaction, which is seen as a win-win proposition for NPCI given that the company has a negative net worth, said a government official.

Despite heavy losses incurred in the past, the company has bright prospects going forward as global orders, which dried up after the Fukushima nuclear disaster in 2011, have started to revive after the Russia-Ukraine war put pressure on the energy security of developed countries, analysts have noted.

The immediate effect of the Fukushima Daiichi Nuclear Power Plant accident in 2011 was a decline in global nuclear electricity generation. Even though efforts to deploy other low-carbon sources, such as variable wind and solar, intensified as countries looked for new ways to address the climate crisis, nuclear energy remained the world’s second-largest source of low-carbon electricity after hydro.

LTSSHF was commissioned in 2012 with the aim to secure the supply chain of critical forgings for India’s nuclear programme along with undertaking development work for the new generation reactors in the nuclear as well as the hydrocarbon sector.

“There are very few such big forging firms in the world. Buying out NPCI will free L&T to invest more and to chart a course of its own to make the firm a key supply chain partner in nuclear and other sectors,” another official commented.

L&T solely funds its losses after NPCI stopped contributing its share by way of fresh capital infusion.

There is no reason for NPCI to remain a partner in the company if it is not willing to contribute fresh capital to keep the facility maintained and pay the staff to keep the facility in top gear. NPCI, in any case, can always place orders to LTSSHF even if they part ways, officials opine.

LTSSHF is a state-of-the-art 65,000 sq meter integrated facility at Hazira in Gujarat for the manufacturing of heavy forgings, with one of the biggest Electric Arc melting furnaces of 125 tons and the largest hydraulic press in India (capacity of 9,000 tons). It is one of a kind in South-East Asia, owing to the fact that all operations are under one roof.

(Source: Financial Express)