Tata Steel to match JSW bid for Bhushan Power

financial chronicle

Business, Companies

Tata Steel did not revise its bid in August and sought directions from the Supreme Court to quash re-bid for BPSL.

BPSL’s acquisition would add pressure on their already high levels of debt.

New Delhi: Taking an aggressive stance, Tata Steel plans to match the highest bidder in the race for debt-ridden Bhushan Power & Steel (BPSL) as it looks to retain control of Singhal family’s erstwhile companies. It has already bagged Bhushan Steel (BSL) and long steel maker Usha Martin in keenly fought auctions.

For Tata Steel, acquisition of Bhushan Power assumes strategic interest, as it would synergise its steel operations in the eastern parts of the country where it already has plants in Jamshedpur and Kalinganagar (Odisha). The Bhushan Steel’s acquisition has further strengthened its position in the market.

Sources privy to the development said Tata Steel would approach the committee of creditors (CoC) seeking an opportunity to match the highest bidder for BPSL as the company had emerged as the successful resolution applicant and issued letter of intent (LoI) in the earlier rounds of bidding conducted in supervision of the insolvency court.

Tata Steel’s move means it would revise its bid to Rs 19,700 crore from its earlier Rs 17,000 crore. In the revised bid invited under directions from the National Company Law Appellate Tribunal (NCLAT) in August, JSW Steel is understood to have made the highest offer of Rs 19,700 crore followed by Rs 19,000 crore bid from UK-based Liberty House.
Tata Steel did not revise its bid in August and sought directions from the Supreme Court to quash re-bid for BPSL. But with the apex court throwing the ball again in the court of NCLAT to decide the fate of re-bids, sources said Tata Steel thought it is right to approach the CoC seeking rightful opportunity to match the highest bidder. It is not clear on what grounds CoC could give this option to Tata Steel but experts said that a clear winner of an earlier round of auctions could be asked to match the highest offer if auction process got entangled in procedural and legal complications.

With Tata Steel looking to come back into the fray for BPSL, the bidding war is expected to heat up again as other two companies are also keen to take over the steel making entity.

Though BPSL owes about Rs 45,000 crore to lenders and has been referred to NCLT for insolvency resolution in June last year, it is considered a prized asset for bidders at a discount. The insolvent entity integrated operations with steel-making capacity of 3.1 million tonnes per annum in Odisha. The plant is close to iron ore mine sites and also has a captive power station.

BPSL received two resolution plans from domestic steel companies Tata Steel and JSW in the first round of bids early this year. While Tata Steel offered Rs 17,000 crore, JSW made an offer of Rs 11,000 crore. This was revised upwards by more than 80 per cent to Rs 19,700 crore when Tata Steel’s challenge in Supreme Court against a rebid ordered by NCLAT was defeated.

Tata Steel has also emerged as the higher bidder for Bhushan Steel (with an offer of Rs 32,000 crore), another group company facing insolvency process. It is thus keen even to acquire Bhushan Power that will offer increased synergy in operations. BPSL is among the first list of 12 non-performing assets (NPAs) referred by the Reserve Bank of India for NCLT proceedings.

For JSW, acquisition of Bhushan Power would allow it to retain the numero uno position in the Indian market for a long time to come with targeted capacity of 40 million tonnes by 2030.

But for both the companies, BPSL’s acquisition would add pressure on their already high levels of debt. JSW has a total debt of about Rs 45,000 crore while Tata Steel is sitting on debt to the tune of about Rs 76,000 crore.