JSW Steel looks for partners in Bhushan Steel bid

Sajjan Jindal-led JSW Steel is in talks with multiple investors for its proposed Bhushan Steel bid. Discussions are on with Piramal-Bain Fund, JFE Steel Corporation and private equity (PE) firm KKR.

An email sent to JSW Steel officials went unanswered, while KKR didn’t respond. A Piramal group spokesperson said, “We don’t comment on market speculation.” 

Sources said JSW Steel was likely to bid “aggressively” for Bhushan Steel. The PE players, who would provide the funding, could exit a few years later, while JFE Steel could be a technology partner and may even explore equity participation.

A JFE Steel spokesperson said, “JSW Steel and JFE have concluded the strategic tie-up contract. Although we’re always considering new business opportunities, nothing has been decided.” JFE Steel provides technical help to JSW Steel for auto applications and has 15 per cent stake in the company.

The management of Bhushan Steel would be with JSW Steel if the consortium wins the bid. Bhushan Steel had a capacity of 5.6 million tonnes (mt) and a debt of about Rs 44,478 crore in FY16. Bhushan Steel would provide JSW Steel — already strong in the west and south — with a foothold in the east. 

According to Bhushan Steel’s 2015-16 annual report, the firm is a long-term supplier to Maruti Suzuki, Tata Motors, Honda, Mahindra & Mahindra, and Ashok Leyland. In the consumer durables space, its customers include LG, Samsung, Videocon, and Haier. JSW Steel has been looking to grow its capacity to 40 mt from the current 18 mt. It has already announced a capex of Rs 26,800 crore to increase its steelmaking capacity to 23 mt by March 2020.

Acquisitions — domestic and foreign — have been on its radar for a while now. However, as far as Bhushan is concerned, it could face competition from national and international bidders. It is understood that ArcelorMittal has been weighing options and Vedanta, too, has said that it would consider bidding for stressed steel assets if it gave returns on capital.

“Potential investors may be attracted to the long-term India growth story, especially if they get good assets at cheap rates. Also, these assets being readily available, risks associated with greenfield projects are not applicable,” said ICRA Senior Vice-President Jayanta Roy.

JSW Steel had, however, approached lenders with an offer for a debt takeover of Rs 20,000-22,000 crore for Bhushan Steel before the insolvency process had started under the Reserve bank of India directive. But that proposal now stand null and void as the company is going through the insolvency process under the Insolvency and Bankruptcy Code. Once the information memorandum is prepared, the resolution professional will be inviting bids of the company and JSW Steel would have to make a fresh offer.