JSW may not pursue Essar Steel if it wins Bhushan Power
Creditors to Bhushan Power and Steel are overwhelmingly in favour of JSW Steel’s offer for the stressed plant
Mumbai: JSW Steel Ltd may not pursue its interest in buying out bankrupt Essar Steel if it wins the stressed Bhushan Power and Steel Ltd instead, said two people close to the development. According to a few members of Bhushan Power and Steel’s committee of creditors (CoC) that Mint spoke to, bankers are overwhelmingly in favour of JSW Steel’s offer for the stressed plant.
One banker that Mint spoke to, who did not wish to be named because the voting results are not yet public, said that JSW Steel’s offer of ₹19,700 crore for the stressed plant has won the approval of more than 67% of the voting CoC members, the minimum threshold that the winning resolution plan should cross.
The final decision can only be announced by the National Company Law Appellate Tribunal (NCLAT), but banks are keen to go with the highest offer, the banker said.
Bhushan Power and Steel, under its earlier promoter Sanjay Singhal, had accumulated debts of over ₹47,000 crore until it was forced into bankruptcy under the Reserve bank of India’s (RBI’s) first “dirty dozen” list of NPA accounts.
In the initial round of bidding, Bhushan Power and Steel had got bids of ₹11,000 crore from JSW Steel, ₹17,000 crore from Tata Steel and ₹18,500 crore from Liberty House.
JSW Steel had subsequently revised its bid to ₹19,700 crore, which has now won the lenders’ approval.
Bhushan Power and Steel operates a 3.5 million tonne (mt) steel plant in Odisha.
“This is a much better strategic fit for JSW Steel, given its proximity to JSW’s flagship plant in Vijaynagar, Karnataka,” said one person close to the development, requesting anonymity.
“If JSW wins this, it doesn’t make sense to pursue Essar Steel, which is much larger at 10mt, costs much more and is on the west coast.”
On 9 October, Press Trust of India had reported that JSW Steel was seeking a legal opinion on whether it could bid solo for Essar Steel. JSW had initially teamed up with Numetal Mauritius consortium in the second round of bids for Essar Steel, but the Supreme Court had deemed the consortium invalid if it failed to pay dues in connected bankrupt companies.
The Essar Steel case is stuck in a legal quagmire of its own, where both leading contenders for the assets—ArcelorMittal and Numetal Mauritius—required to pay vast amounts of debt in connected companies before qualifying to bid for it. Even so, the highest offer for Essar Steel, so far, has been from ArcelorMittal at ₹42,000 crore, a bid that JSW Steel would find difficult to match.
On Wednesday, ArcelorMittal said it will pay ₹7,469 crore to the financial creditors of Uttam Galva Steels Ltd and KSS Petron Pvt. Ltd to become eligible to bid for Essar Steel.
Meanwhile, a final decision on the fate of Bhushan Power and Steel hinges on the NCLAT hearing a plea from Tata Steel on 22 October, seeking to disqualify both Liberty House’s and JSW Steel’s bids.
Tata Steel has pointed out that Liberty had missed the deadline for submission of its offer, while JSW had changed the basic parameters of its bid when it revised it.
Even if the NCLAT respects the CoC’s decision to back JSW Steel’s offer, Mint could not independently confirm if Tata Steel would be willing to outbid the offer.
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When contacted, a Tata Steel spokesperson declined to comment on the matter.
In the race to win the 5.6mt capacity of Bhushan Steel, JSW Steel had been the frontrunner until Tata Steel ramped up its initial bid from ₹24,000 crore to ₹35,200 crore to finally win the asset.
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