JSW Steel, which came from behind to surge ahead of the Tatas in the race for Bhushan Power and Steel Ltd (BPSL) with an offer of Rs 19,700 crore, is unlikely to face competition in its bid to acquire the stressed asset with the Tatas unwilling to raise their original offer.
“We will stay with our original bid. It is our stated position,” said a spokesperson for Tata Steel.
Tatas have, however, legally contested the lenders’ decision to allow JSW Steel to alter parameters of its bid. In the process, JSW Steel got to improve its bid twice after the Tatas were declared the highest bidder.
On December 20, National Company Law Appellate Tribunal (NCLAT) reserved its order on BPSL and directed both JSW Steel and Tata Steel to file written submissions.
Tata Steel had put in an offer of Rs 17,000 crore for BPSL, which made them the highest bidder in the initial round when JSW had bid Rs 11,000 crore.
The third bidder for BPSL was Sanjeev Gupta’s Liberty group with ?18,500 crore but after the deadline. However, Liberty group is not pursuing the BPSL bid aggressively.
Subsequently, JSW Steel revised its bid to Rs 19,700 crore, pipping the two other bidders with its offer receiving lenders’ approval by a two-thirds vote.
Sanjay Singal-led BPSL had piled up debt of over Rs 47,000 crore from a consortium of banks led by Punjab National Bank, before it was admitted to the National Company Law Tribunal (NCLT) for initiation of insolvency resolution process. It is one of the 12 large companies identified by the Reserve Bank of India for early resolution. It operates a 3.5-million tonne steel plant in Odisha.
Singal has also challenged the Insolvency and Bankruptcy Code (IBC) in general and Section 29A in particular, which bars defaulting promoters from bidding for stressed assets. Singhal had contented that excluding the promoter from bidding for his own asset converts BPSL’s resolution process into a discount sale.
Tatas have bid for stressed steel assets aggressively as part of a renewed focus on the domestic steel market where they have announced plans to achieve 30 million tonne installed capacity by 2025.
Last year, under the NCLT, Tatas acquired stressed steel asset Bhushan Steel for Rs 35,200 crore. Plans are afoot to raise its capacity at a later stage. Tata Steel has also embarked on a five million tonne expansion of their new greenfield unit at Kalinganagar, Odisha, at an investment of Rs 23,500 crore.
Outside the NCLT, Tata Steel recently did a Rs 4,525-crore deal to acquire Usha Martin’s steel unit near Jamshedpur. Steel being a cyclical industry, experts feel at this stage Tatas would prefer to be prudent and focus first on consolidating their new acquisition before further exposure.
Source: Economic Times, January 17, 2019