Tata SteelBSE -3.91 % has emerged a frontrunner to acquire debt-laden Bhushan Power and Steel after lenders to the company decided that they would only consider Tata Steel’s offer of Rs. 24,500 crore for further negotiations on Wednesday, setting aside an offer by rival steel-maker JSW Steel that is lower by Rs. 11,500 crores. Tata and JSW were the only two bidders for the company ET reported on 9 February.
Tata Steel’s offer includes an upfront payment to lenders of Rs. 17,000 crores, a cash infusion in the company of Rs. 7000 crores to meet working capital requirements and a payout to operational creditors as well as employees.
Tata Steel may be asked to sweeten its deal further, after which lenders would put its offer to a vote before submitting it to the National Company Law Tribunal for approval.
There was consensus amongst a majority of lenders that Tata Steel’s offer and accompanying resolution plan was in the best interest of all stakeholders, a banker privy to the process said. The offer would help lenders maximize recovery of their dues.
Bhushan Power and Steel was admitted to bankruptcy court in June last year. Mahender Khandelwal, head of restructuring services at BDO is the resolution professional for the company.
A Tata Steel spokesperson told ET on 18 January in response to queries pertaining to its interest in acquiring Bhushan Power and Steel, “As a process, we do assess and evaluate various strategic opportunities for growth. This is an ongoing process in the company”. The company was yet to respond to emailed queries sent on Saturday.
Bhushan Power and Steel is owned by Sanjay Singhal, an estranged member of the family that owns listed-Bhushan Steel which is also undergoing insolvency proceedings. ET reported in its edition on 17th February that Tata Steel had emerged the highest bidder for Bhushan SteelBSE 19.93 % as well.
The unlisted Bhushan Power and Steel has a capacity to produce 3.2 million tonnes per anum of steel and also owns a 700 megawatt captive power plant.
Tata Steel will have to approach the anti-trust regulator Competition Commission of India (CCI) for approval post its offer being accepted by the bankruptcy court. An acquisition of both Bhushan Steel and Bhushan Power and Steel could give the company an almost 50% share of the market for flat-steel products in India, according to a senior executive at a rival steel-maker. Flat-steel products are used in manufacturing of automobiles and consumer appliances among various other uses.
The auction for Bhushan Power and Steel received interest from as many as 12 bidders initially, including ArcelorMittal, Vedanta, AION Capital and Dubai-based businessman Shaikh Ayub. Tata and JSW were the only two bidders that it made it to the final stages of bidding.
UK-based Liberty House expressed its interest to make a bid for the company post the deadline for submission of final offers. Its offer was unlikely to be accepted by the committee of creditors as it would violate the conditions for bidding that were part of the request for proposal document, according to a person directly in the know.
Liberty House was free to approach the National Company Law Tribunal to consider its request, the person said.
A consortium comprising over two dozen banks are owed Rs. 48,524 crores by the debt-laden Bhushan Power and Steel. Punjab National BankBSE -4.26 % leads the lenders consortium though state Bank of India has disbursed the largest proportion of loans to the company.
