Tata Steel highest bidder for Bhushan Steel, offers Rs 100 bn more than JSW

Bhushan Steel was sent for debt resolution by its lenders after it failed to repay its dues worth Rs 560 billion

Tata Steel has overtaken JSW Steel and emerged as the highest bidder for Bhushan Steel, according to sources close to the development.

Tata Steel is said to have offered Rs 360 billion and the gap between the two bids could be Rs 100 billion.

Bhushan Steel was sent for debt resolution by its lenders after the company failed to repay its dues worth Rs 560 billion under the Insolvency and Bankruptcy Code 2016.

The financial bids for Bhushan Steel were opened at the lenders' meeting held in New Delhi on Friday. With this acquisition, Tata Steel would be adding a capacity of 5.6 million tonnes per annum, which Bhushan Steel has at its plant in Odisha. 

Through this acquisition, Tata Steel can feed the markets in eastern India. It has plants in Kalinganagar and Jamshedpur. It also has mines in the east and can save on logistics cost.

Sources close to JSW indicated they could consider placing a request before the committee of creditors for a revision of its offer.

A final call will be taken later. It would, however, be up to the committee to decide whether it would allow a revision if such a proposal was made.

 

In the case of Electrosteel Steels, Vedanta has emerged the highest bidder. But Tata Steel wrote to the committee of creditors, seeking to revise its offer. The committee is yet to take a call on this.

In accordance with a proposal of the Indian Banks’ Association, lenders had decided that negotiations would take place with the H1 bidder. However, this was not binding under the Insolvency and Bankruptcy Code guidelines.

The financial bids for Bhushan Power & Steel will be opened next week. Tata and JSW Steel are the only two bidders there. Sources indicated Tata Steel was likely to emerge the highest bidder for Bhushan Power & Steel too.

Both the Bhushan companies were on the Reserve Bank of India's first list of 12 companies that failed to repay bank loans.

JSW is the only bidder of Monnet Ispat & Energy. Numetal, a VTB Bank Russia-led company, and ArcelorMittal are in the race for Essar Steel, whose financial bids will be opened next week.

Tata Steel has a capacity of 12.7 million tonnes — 9.7 million tonnes in Jamshedpur and 3 million tonnes in Kalinganagar. It also has the environmental clearance for adding another 1 million tonne in Jamshedpur. 

Recently, the Tata Steel board cleared an additional capacity of 5 million tonnes in Kalinganagar for its second phase of expansion. The second phase will be implemented in 48 months.  With an addition of 5.6 million tonnes through the Bhushan Steel acquisition, its capacity would be 24.3 million tonnes. Its nearest rival, JSW, has a capacity of 18 million tonnes and will be ramping up its capacity to 23 million tonnes by 2020.  Monnet Ispat & Energy, for which JSW is the only bidder, has a capacity of 1.5 million tonnes.