Tata Steel expects Bhushan Steel sell-off to be closed this week

Awaiting response from the bankers for its bids to acquire Bhushan Steel and Bhushan Power & Steel, Tata Steel expects the acquisition would provide synergy to its operations in eastern India, where the company has a manufacturing unit, besides increasing its secondary product portfolio.

Tata Steel has emerged as the highest bidder for Bhushan Steel. The company is believed to have offered Rs 360 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.

“We are yet to hear from the IRP (Incident Response Program), bankers on bids for Bhushan Steel...We are always in fray for stressed assets in eastern India,” Tata Steel MD T V Narendran said on Monday. Bhushan Steel bids are likely to be finalised this week, he said. 

Bhushan Steel is one of the largest secondary steel producing companies with an existing annual production capacity of 5.6 million tonne. It has country's largest and the only Cold Rolled Steel Plant with an independent line for manufacturing Cold Rolled Coil and Sheet up to a width of 1700 mm.

The secondary steel sector contributes around 57 per cent of the total steel production in the Indian Steel industry. This sector uses the production techniques that make use of the steel scrap or the sponge iron.

If Tata Steel emerges as the winner it would be adding a capacity of 5.6 million tonne Bhushan Steel plant in Odisha to its portfolio. Through this acquisition, Tata Steel can feed its plants in Kalinganagar and Jamshedpur. It also has mines in the east and can save on logistics cost.

Tata Steel has a capacity of 12.7 million tonne — 9.7 million tonne 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 tonne.

Another company in fray for Bhushan Steel is JSW Steel, which quoted Rs 100 billion for the takeover. Both the Bhushan companies were on the Reserve Bank of India's first list of 12 companies that failed to repay bank loans.