JSW-Tata Steel battle for Bhushan Power & Steel spills over to iron ore

The way the tussle over Bhushan Power & Steel goes will decide the numero uno in the domestic steel market in the immediate term at least

Locked in a battle for Bhushan Power & Steel, the clash between the country’s top two steelmakers, Tata Steel and JSW Steel, is spilling over into the sphere of iron ore. JSW Steel has challenged the auction process for iron ore blocks in Odisha. 

The matter being heard in the Delhi High Court is on participation of companies holding more than the limit permitted under the Mines and Minerals (Development & Regulation) (MMDR) Act. 

The court has restrained the Odisha government from proceeding on e-auctions of two iron ore blocks, Chandiposhi and Purheibahal, in Sundargarh district, originally scheduled to be put under the hammer on May 5 and 8.

Seventeen companies, including JSW and Tata Steel, had evinced an interest in the blocks. Tata Steel, however, appears to be the only company for which the MMDR clause holds because the prevailing auction rules debar a company from winning electronic auctions of a mineral block if it possesses more than 10 square km of a mineral lease area. 

Declining to comment, a Tata Steel spokesperson said the matter was sub judice. An email sent to JSW Steel went unanswered.

Tata Steel is understood to have six iron ore and manganese mines in its leasehold in the state with the combined area straddling about 50 square km. The Odisha government has appealed to the Centre to raise the permissible limit from 10 square km to 75 square km.

Mining is another battlefront that JSW Steel has opened with Tata Steel. The two companies had vied for Bhushan Steel, referred for debt resolution under the Insolvency and Bankruptcy Code (IBC), and it went to Tata Steel. 

Now, JSW Steel and Tata Steel are engaged in a tussle over Bhushan Power & Steel. The way it goes will decide the numero uno in the domestic steel market in the immediate term at least.

Currently, JSW Steel and Tata Steel are a whisker away from each other. JSW Steel is at 18 million tonnes (mt). Monnet, which it acquired with AION, is another 1 mt. Tata Steel is at 18.5 mt after the acquisition of Bhushan Steel. 

Before the auction of assets, the gap wasn’t close. JSW was at 18 mt and Tata Steel was at 13 mt.

On Monday, the three bidders for Bhushan Power & Steel — Tata Steel, JSW Steel, and Liberty House — will have the opportunity to revise their bids in accordance with the order of the National Company Law Appellate Tribunal. 

The rebid was prompted by a surprise move by JSW Steel, which revised its bid from Rs 110 billion, as submitted in February, to Rs 180 billion. 

Till then, the lenders had picked Tata Steel as the highest qualified bidder, which has offered Rs 170 billion as upfront, twice.

So far, JSW Steel has revised its bid three times and is expected to submit a revised bid on Monday. 

Bhushan Power could see offers in excess of Rs 210 billion, according to sources. “With no visibility in the Essar Steel case, which is likely to drag for a while, we decided to go for a revision in Bhushan Power,” said a source close to JSW Steel. JSW Steel is an investor in a subsidiary of the consortium in the fray for Essar Steel. 

At the back of JSW Steel’s mind was the success of Monnet acquisition under the IBC, and the failure to bag Binani Cement.

“We realised that we played by the rules in Binani and lost it. We didn’t want a repeat,” a source said. In the first round of bidding for Binani, JSW Cement had emerged as the highest bidder.

Tata Steel, too, played by the rules and lost Electrosteel Steels to Vedanta. Tata Steel wanted to revise its bid for Electrosteel but lenders decided to negotiate only with the H1 bidder.