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Insolvency process: JSW, Tata Steel lead in buying stressed assets

The only option for stressed asset laggards now is to bid aggressively for Essar Steel

Dev Chatterjee & Ishita Ayan Dutt  |  Mumbai | Kolkata 

JSW Steel

JSW and Tata have emerged as the most aggressive bidders for put on the block under the (RBI)-mandated insolvency process. While cash-rich won the bid for Electrosteel Steels and preferred to stay away from the race for Bhushan and Bhushan Power & Steel, ArcelorMittal was mired in controversy over its investment in that failed to repay their debt and are facing proceedings in the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC), 2016. JSW is already set to win Monnet Ispat & Energy and has emerged as the frontrunner for Bhushan It is pitted against Tata to take over Bhushan and Bhushan Power & The financial bids for Bhushan Power were not opened on Thursday and were sent to SBI Caps for evaluation. The only option for stressed asset laggards now is to bid aggressively for Essar Steel, in which VTB Bank of Russia, which has tied up with the Ruias, is expected to take over a large part of the outstanding dues. Tata is the second-highest bidder for Electrosteel, the top bidder being Anil Agarwal's But both Tata and have already written to the committee of creditors that they want to revise their offer for Electrosteel, and the committee is yet to take a call on that. According to sources close to the development, JSW has offered Rs 300 billion for Bhushan Steel, around Rs 50 billion more than Tata Steel's offer. However, lenders will give weightage to all parameters, and a final picture may emerge by the end of this week or early next week. Bhushan has a production capacity of 5.6 million tonnes per annum (mtpa), and Bhushan Power & 3 mtpa. If JSW bags Bhushan Steel, then its capacity will reach over 23 mtpa, and 25 mtpa with Monnet's acquisition. Tata Steel's current capacity is 12.7 mtpa. It also has clearances for adding 1 mtpa at Jamshedpur. Besides, the firm has received board approval for the second phase of expansion from 3 mtpa to 8 mtpa at Kalinganagar in Odisha. Tata is expected to bid for Essar Steel, which has a capacity of around 10 mtpa, though it will face intense competition from the Ruias. The pecking order of the industry is somewhat like this: JSW is the largest maker in India right now, followed closely by Authority of India (SAIL), and then Tata The Tata group, under its new chairman, N Chandrasekaran, is busy bringing its house in order and is cautious in its acquisitions.

The group will not get into a bidding war after its bitter experience in Europe, which almost derailed the company's financials and was a big cash drain on its resources for the past 10 years. Tata Steel's net debt to equity on a consolidated basis works out to be 2.2 times at the end of September 2017, one of the highest in the industry. The firm reported gross debt of around Rs 895 billion and cash and investment worth around Rs 150 billion at end of first half of the current financial year. jsw graph Tata has announced that it will raise close to Rs 128 billion from a rights issue to make a bid for with parent Tata Sons, putting in its share of cash. However, Tata Steel's domestic division, which is also the holding company for its global business, still has the financial headroom with net debt to equity of around 0.5 times at the end of first half. The company may leverage this to make additional borrowings to funds acquisitions. The company will also get a breather once its money-losing European business is merged with Thyssenkrupp. Industry sources said if Tata Steel’s captive mines are taken out, then JSW is doing far better across all the financial metrics. Under its joint MD and Group CFO, Seshagiri Rao, JSW is more nimble-footed. Its net debt to equity ratio of 1.8 times at the end of September last year is better than the Tatas. The company reported gross debt of Rs 433 billion, and cash and investment worth Rs 24.33 billion at the end of first half of current financial year. The company tied up with Aion to make a bid for Monnet Ispat and with Piramal to bid for Bhushan It went alone for Bhushan Power's assets.

First Published: Fri, February 09 2018. 11:40 IST
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