JSW Steel bids for Tata UK assets: Sources

In 2014, JSW Steel unsuccessfully bid to buy some assets from Italy's 2nd-largest steelmaker, Lucchini

JSW Steel Ltd has bid for the British operations of Tata Steel Ltd, two sources with direct knowledge of the matter confirmed, worrying bankers about its high debt levels and pulling down JSW shares on Tuesday.

JSW Steel, controlled by acquisitive billionaire Sajjan Jindal, wants to become the world's third-largest steel company and the bid for the Tata assets is in-line with that goal, said a source close to the company.

Financial Times first reported JSW's bid, after Tata said on Monday that seven expressions of interest for its British assets had been taken to the next stage of the sale process it began last month. Tata did not name the bidders, but metals group Liberty House and a buyout team called Excalibur confirmed submitting expressions of interest.

Mumbai-based JSW Steel unsuccessfully bid in 2014 to buy some assets from Italy's second-largest steelmaker, Lucchini, to enter the European market. In 2010, it bought out Indian company Ispat Steel, more than a decade after JSW emerged from near-bankruptcy.

JSW Steel Joint Managing Director, Seshagiri Rao, and Tata Steel head spokesperson, Chanakya Choudhury, did not respond to requests for comment.

JSW Group, with interests in steel, power, cement and ports, had a gross debt of around 400 billion rupees ($6 billion) as of April, making it one of India's most indebted conglomerates.

Rao told Reuters last month that although the group was growth-hungry, it would not let its financial stability suffer.

Infrastructure bankers in Mumbai say, however, that they are uncomfortable with the JSW Group's debt, and they think the company is only testing the waters with the Tata bid.

One potential deal-killer is the big pension liabilities of the Port Talbot steel mill in Wales that JSW Steel might have to shoulder, said the bankers who did not want to be named.

The bankers also said that a bargain deal might help JSW Steel turn around Tata's money-losing UK business given their record of making steel efficiently and profitably in India without having any raw material security.

JSW Steel's shares, which have risen a quarter so far this year, fell more than 3 per cent on Tuesday to their lowest in a month. The BSE Sensex was up slightly.

($1 = Rs 66.6700)