JSW prepares war chest to bid for toxic assets

To bid for 4 assets with combined debt of Rs 109,000 crore next month

JSW Steel has emerged as the most aggressive bidder for stressed steel assets. The country’s largest steel maker is vying to buy 9.9 million tonnes of additional capacity and increasing its lead over its nearest competitor, Tata Steel. But JSW would require a hefty cash chest that could service Rs 60,000 crore of additional debt if it wins the race for all the four companies, according to banking sources.

Among the stressed assets on offer, JSW Steel plans to bid for Bhushan Steel, Bhushan Steel & Power, Monnet Ispat and Jaypee Infratech next month. The four toxic firms owe close to Rs 109,103 crore to banks and have defaulted on loans. Lenders are likely to take at least 50 per cent hair cut, making it easier for bidders to pick these assets, sources said.

JSW currently has Rs 43,334 crore of debt and cash & investment worth Rs 2,433 crore. It aims to maintain its net debt to equity at 1.62 times and net debt to earnings before interest tax, depreciation and amortisation (EBITDA) at 3.66 times even after these acquisitions, its chief executive officer and managing director Seshagiri Rao said. “We don’t want to overleverage ourselves and are currently in talks with other private equity funds and evaluating all the companies.”

The company is also open to raising equity and is in talks with JFE of Japan. JSW is in talks with PE players like Aion Capital to bid for Monnet Ispat and Piramal Bain Credit Capital to make a joint bid for Bhushan’s assets. The Bhushan and Monnet assets are a good fit for the company as it currently does not have any presence in the east.

The group would also join hands with Jaiprakash Associates to bid for the real estate business of Jaypee Infratech. But the fate of this transaction would depend on an ongoing suit filed by Jaypee Infratech’s customers in the Supreme Court. 

The 59 per cent rise in market value of JSW since January would help the company to raise funds, analysts said. As on Thursday, JSW has a market value of Rs 62,557 crore as compared to Tata Steel, which has a market value of Rs 66,688 crore. “The bidding war for Bhushan Steel would be interesting to watch, as both cash-rich Vedanta and Tata Steel are bidding for it,” a banker said. ArcelorMittal is another bidder, which could change the game with its access to low-cost overseas funds, the banker added. “It will certainly not be easy for JSW to get Bhushan’s assets.”

JSW Steel Chairman Sajjan Jindal had recently said that “dubious” promoters should not be allowed to bid for their assets so as to prevent misuse of the insolvency and bankruptcy code. 
 

The equity value of these companies should be zero and the companies should be delisted so that it helps recovery of these steel companies. The government is looking into his suggestions and may announce changes before the bids are made by the second week of December.

NCLT junks Srei’s plea in Deccan Chronicle case

The Hyderabad bench of the NCLT has dismissed Srei Infra Finance’s petition against removal of its name from the committee of creditors in the ongoing insolvency resolution process of Deccan Chronicle Holdings (DCHL). The IRP said that being a shareholder in DCHL, Srei cannot be a part of the committee of creditors.

BS Reporter