India's Tata Steel emerges as top bidder for Bhushan Steel

8 March 2018

 Tata Steel Ltd (TISC.NS) said on Wednesday it had been selected as the highest bidder to buy a controlling stake in debt-laden Bhushan Steel Ltd (BSSL.NS), ending weeks of speculation on which Indian group would clinch a deal.

Salt-to-software conglomerate Tata Group’s steel business and India’s biggest domestic steelmaker JSW Steel Ltd (JSTL.NS) were the two primary industry bidders for the acquisition of Bhushan Steel.

At 559.89 billion rupees ($8.75 billion), Bhushan Steel faces the highest claims among a dozen companies pushed to bankruptcy court last year as part of a government drive to clear a mountain of bad loans choking credit at Indian banks.

“It (Tata Steel) has been identified as the highest evaluated compliant resolution applicant to acquire controlling stake of BSL (Bhushan Steel Ltd),” the company said in a stock exchange notice on Wednesday evening.

Based in the east of India, the company has an annual steelmaking capacity of 5.6 million tonnes and is one of the biggest producers of cold-rolled steel products used to make cars. It also supplies steel for producing consumer goods such as refrigerators and washing machines.

A controlling stake in Bhushan Steel gives Tata Steel an edge in the fast growing automotive steel market in India at a time of strong steel price upswing, a note from brokerage Edelweiss Securities said.

Tata’s access to iron ore mines also puts it in a much better position to turn around Bhushan Steel’s unit.

“Tata Steel can add the maximum value as well as draw the most benefit from Bhushan Steel,” said an analyst who covers both the industry.

Bhushan Steel had said last month that the resolution professional managing its case received plans from Tata Steel, JSW Living, a subsidiary of JSW Steel, and employees of Bhushan Steel.

India, which did not have a formal bankruptcy process until mid-2016, has seen a surge in bankruptcy cases since last year, with over 500 companies currently facing bankruptcy court proceedings.

The surge in cases comes after the government changed the law giving greater powers to the central bank, which has so far ordered creditor banks to push nearly 40 companies with loan defaults of nearly 4 trillion rupees ($62.5 billion) into bankruptcy proceedings.

Essar Steel Ltd, another company with a heap of sour loans owed to banks, has seen heightened interest and aggressive bidding from world’s biggest steelmaker ArcelorMittal (MT.AS) and a consortium led by Russian bank VTB, according to Indian media reports.