The Insolvency and Bankruptcy Code (IBC) will accelerate consolidation in steel industry and help many global players who have been struggling to enter India, EY said today.
Many of the cases referred to the National Company Law Tribunal (NCLT), under the IBC process, are from the steel sector, said Anjani Agarwal, EY Partner and Global Steel Leader.
“What will be the likely impact of that for the industry. That’s the area of very interesting transformational subject and the whole landscape is suppose to change,” he said.
He was speaking during India Minerals and Metals Forum here.
The IBC process being on a fast track resolution mechanism, a substantial part of the debt will be quickly realised or renewed and moved to a more sustainable cash flow structures, Agarwal said.
“The intense competition amongst bidders also bodes well for potential write backs of the provisions of lenders. A healthier banking industry, with unlocked flow of capital, will now be in a position to fund huge investments required to build new capacity for meeting future metals demand for the country,” he added.
There has been a wave of consolidation in the steel industry globally but not reflected within India as yet, he said, adding that insolvency process has triggered this and will also witness the theme playing out domestically.
“Globally the wave of consolidation that happened in the steel industry eluded India. But this is one trigger which will fast forward and accelerate consolidation in the Indian industry. We are already seeing that happening. Tata SteelNSE 0.95 % has acquired one, JSW has acquired one,” he said.
Over a period of a year or so, several key players are already in the process or are on the cusp, would have undergone a resolution, he said.
With the balance sheet problem having been resolved or deferred, stronger metals industry will emerge post this restructuring with sustainable debt levels, he added.
“With a stronger industry because the industry will more sort of confidant to try and try move towards capacity expansion on the steel side to meet our 300 million tonnes target,” he said.
“Many of the global players had struggled to enter India and this is immensely significant opportunity for them to try and set up the footprint in the country,” he said.