JSW Steel is unlikely to bid for Uttam Value Steels and Uttam Galva Metaliks as its chances of securing Bhushan Power and Steel get stronger, three people aware of the development said.
JSW Steel had put in an expression of interest (EoI) in October for the twin stressed assets that together owe Rs 5,400 crore to lenders. However, ET had reported Monday that JSW Steel will not be facing competition from Tata SteelNSE 0.39 % for its Rs 19,700 crore offer for Bhushan Power and Steel with Tata Steel unwilling to revise its bid. With its position cemented further, it may not bid for the firms that would have added to its downstream capacities.
“JSW Steel is not interested in the assets anymore,” said a person close to the company. Another person aware of the resolution process of the two companies said the company has stopped “actively pursuing” the asset after putting in an EoI.
Its reluctance to bid for the assets that would have otherwise aligned with its strategy of augmenting downstream and value added steelmaking also stems from the recent correction in steel prices that fell to a one year low in December. This might have discouraged the company to stretch its balance sheet too much at a time when the upcycle that the steel industry witnessed last year seems to have changed course, said a person aware of the resolution process at the stressed steel companies.
The bid deadline for the assets has been extended to January 21.
“The largest reason for them to walk away could be the enhanced possibility of getting BPSL,” said Ritesh Shah, lead analyst for materials at Investec. To be sure, Shah said, it is unclear by how much will it stretch its balance sheet as JSW Steel could be possibly employing a ‘joint control model’ to acquire BPSL, that is going to insulate the company from the short-term risks involved in turning around a stressed asset. JSW Steel has been categorical about not exceeding its net debt to EBITDA ratio beyond 3.75x.
