Billionaire Sajjan Jindal’s flagship JSW SteelBSE 1.96 % is in advanced talks with a distressed fund jointly floated by Piramal Enterprises and Bain Capital Credit to bid for Bhushan SteelBSE 1.96 %, which has recently been admitted to bankruptcy courts for possible revival.
“Both parties are in the final stages of negotiations to put together a joint bid for the distressed steel maker,” said a person close to the transaction. Bhushan is one of the 12 companies referred to bankruptcy courts by a Reserve Bank of India order in June.
India’s largest steel maker JSW Steel has been eyeing Bhushan Steel for more than a year now as it strives to ramp up output to 40 million tonnes in the next decade through capacity addition as well as acquisitions.
Jindal has a proven track record of turning around stressed businesses. He had earlier acquired Ispat SteelBSE 0.40 % and Southern Iron & Steel Company, and revived both.
JSW officials are hoping to effect a similar turnaround for Bhushan.
Bhushan Steel’s total debt stands at about Rs 42,355 crore and its efforts to find a partner have come a cropper so far.
JSW Steel and Bhushan Steel did not respond to emailed queries while Piramal Enterprises refused to comment on ‘speculation’.
Bhushan Steel, which primarily makes auto-grade steel, is majority owned by the Singal family. The company has been admitted by the National Company Law Tribunal, and now there’s a 180-day timeline that can be extended up to 270 days to decide on a resolution plan in accordance with the Insolvency and Bankruptcy Code (IBC).
The Indian steel industry is showing signs of revival after a particularly tough year during which it fended off Chinese imports. The government’s focus on infrastructure and affordable housing has helped stoke demand while anti-dumping moves have helped the local industry.
Piramal and Bain’s distressed assets fund was floated in August 2016 and has a corpus of about $750 million, with an option to increase it to $1 billion. It seeks to invest in businesses that require restructuring and have fundamentally strong growth prospects linked to India’s infrastructure and consumption needs. If the deal goes through, Bhushan Steel would be its first investment.
“We think the recent banking reforms focused on effective and timely resolution of stressed assets augur well for players like us,” Piramal Enterprises chairman Ajay Piramal had said last year at the fund’s launch.
Investors — both local and foreign —are increasingly showing interest in the country’s stressed assets due to improved market sentiment and introduction of IBC even as gross nonperforming assets (NPAs) have swelled to Rs 7.7 lakh crore, as on March 31, 2017, representing 9.6% of the total banking industry loans.
ET View: Sensible Plan
Expertise counts! One of the biggest domestic steel producers, with big plans for brownfield expansion, seems likely to better value stressed steel assets, and so offer a better acquisition price as well. It would be all for the greater good. We do need quick turnaround of stressed assets, so that valuable resources are speedily redeployed. Steel is a capital-intensive cyclical industry, and India is now the world’s second largest steel producer. Hence the greater need for intra-industryM&As.
