JSW and Tata Steel bid for debt-laden Bhushan Power on the final day

JSW Steel and Tata Steel bid for debt-laden Bhushan Power & Steel on the final day for submission of bids.

According to sources close to the development, JSW Steel is ahead in the race with an offer of Rs 130 billion and Tata Steel Rs 115 billion. The bids will be placed before a legal team, after which SBI Caps will evaluate the financial plans and   place it before the committee of creditors. The process could be over by February 16, sources close to the development said.

Around 13 companies had submitted expressions of interest. Some did not qualify and only five were provided access to the virtual data room.

The liquidation value for Bhushan Power was estimated to be around Rs 90 billion, while the fair value was estimated to be vastly different at Rs 250 billion, sources said. 

Bhushan Power is one of the few companies where lenders had pressed for a fair value much before the insolvency regulator made it mandatory. The committee of creditors is likely to be guided by an average of the liquidation value and the fair value.

The company’s debt in FY16 stood at Rs 372 billion, net sales were at Rs 77 billion and losses were at Rs 24.36 billion. The dues, however, have ballooned to Rs 470 billion now. 

Apart from JSW and Tata Steel, Anil Agarwal’s Vedanta had conducted due diligence of the plant. However, it stayed away from submitting a bid, much as it refrained from making a bid for Bhushan Steel. 

AION Capital was also understood to have shown interest but didn’t submit a bid. Earlier in the day, a Dubai-based investor, who had submitted an expression of interest, withdrew from the process.

ArcelorMittal withdrew last month without citing reasons. Promoter Sanjay Singal had also submitted an expression of interest. However, Singal changed plans after the Insolvency and Bankruptcy Code was amended, debarring promoters from bidding without clearing overdues.

Bhushan Power ran into trouble after its licenses for iron ore and coal mines were cancelled. It was allotted a coal mine with reserves of around 250 million tonnes, but this was deallocated in 2014. The iron ore mines were committed by the Odisha government. Two mines were allocated in 2012 and 2014 after intervention of the Supreme Court. Subsequently, the amended Mines and Minerals (Development and Regulation) Act was passed in 2015, and the company’s iron ore mines were cancelled. The unlisted company has steelmaking capacity of 3 million tonnes across Odisha, West Bengal, and Chandigarh.