Noida-based SMCPower Generation Ltd has acquired the main steel mill and power plant of Concast Steel and Power Ltd under the liquidation process with an upfront payment of ₹300 crore to lenders, said three people familiar with the matter. This is the largest acquisition under the liquidation stage so far in the Insolvency and Bankruptcy Code, 2016.
SMC Power, incorporated in 2000, is part of the promoter group that also owns SMC Foods and Creamy Foods Ltd, which sells dairy products in north India under the Madhusudan brand. SMC Power has an installed annual production capacity of 200,000 tonnes of sponge iron, 350,000 tonnes of billets and 250,000 tonnes of TMT steel bars, besides captive power generation capacity of 33 megawatts in Jharsuguda, Odisha.
“The SMC group will invest a further ₹300-400 crore to make the plant operational and streamline capacities," the first person said. “The company reported an operating revenue of ₹140 crore last year, so it will be able to take on this additional investment. Since Concast’s facilities are close to its existing plants in Odisha, the synergies will be significant," he added.
Mool Chand Aggarwal, chairman, SMC Power, confirmed the development, but declined to elaborate.
Concast Steel and Power, an integrated iron and steel manufacturer with a sintering plant and sponge iron units in Jharsuguda, went into bankruptcy in November 2017, with outstanding dues of nearly ₹10,000 crore. State Bank of India is the lead banker in the consortium that had lent to Concast. With no offers during the corporate insolvency resolution process, the Kolkata bench of the National Company Law Tribunal ordered the company into liquidation in September 2018.
SMC Power offered ₹300 crore for Concast’s Jharsuguda plant, which has the capacity to produce 775,000 tonnes per annum of sponge iron and pig iron, 250,000 tonnes of TMT steel bars, structures and ferro alloys. SMC also acquired a 70MW captive power plant as part of the deal. SMC was advised by investment banking firm Singhi Advisors.
While the immediate outlook for the domestic steel sector is poor, analysts expect the industry to return to its growth trajectory in the second half of this fiscal. Steel producers have turned to exports to make up for lack of domestic demand.
In an 8 June note, credit rating agency Icra said domestic finished steel production recorded its largest ever decline of 82.5% in April. Flat steel production fell by 73% and comprised 69% of total production, while non-flat steel production plunged 90%, highlighting the stress inflicted by the lockdown on secondary steel producers.