Bhushan Steel bids may touch double of liquidation value of Rs 150 bn

Anil Agarwal-owned Vedanta and Sajjan Jindal's JSW Steel set to make aggressive bids

Lenders to Bhushan Steel are expecting Anil Agarwal-owned Vedanta Ltd and Sajjan Jindal’s JSW Steel to make the most aggressive bids — almost double the liquidation value of Rs 150 billion — for the beleaguered company. 

According to lenders, cash-rich Vedanta, which wants to break into the steel industry, has changed the bidding dynamics, with the company pooling in all its resources to make the bids, which might close soon after the Budget next week.

ArcelorMittal and Tata Steel are also likely to submit their bids, but whether they would be willing to invest almost Rs 300 billion in a bankrupt company is doubtful. The latter two companies are interested in Essar Steel’s assets on the west coast, which would also attract similar or higher-sized bids, said a source.

Bhushan Steel has a 5.6 million tonnes per annum (mtpa) steel plant in Odisha, which could give a beachhead to JSW Steel in the eastern region. Similarly, Vedanta, which has already bid the highest for Electrosteel Steels plant, wants to break into the steel industry, currently dominated by JSW Steel and Tata Steel. “This is the biggest NPA resolution for lenders. The asset is good, and both Vedanta and JSW Steel are expected to fight for the asset,” said a source close to the development. 

Vedanta

• Captive mines 
• Cash-rich
• Good turnaround experience in large firms like Balco & HZL

JSW Steel 

• Fundraising capability
• Demonstrated ability to acquire and turn around weak steel companies
• Ability to control cost, report healthy operating margins across steel cycles

JSW, which has Rs 433 billion of debt, and cash and investment worth Rs 24.33 billion, aims to maintain its net debt-to-equity ratio at the current levels and net debt to earnings before interest tax, depreciation and amortisation (Ebitda) at 3.66 times after the acquisition.