International Investors Line Up For Essar Steel And Bhushan Steel Assets
ArcelorMittal and POSCO want to bid for Essar Steel and Bhushan Steel
Global steel giants are considering investing in Essar Steel Ltd. and Bhushan Steel Ltd. with the Insolvency and Bankruptcy Code establishing a well-defined legal process of transferring ownership of stressed assets.
ArcelorMittal and POSCO are looking at these two companies, two people familiar with the matter told BloombergQuint. Domestic steelmakers such as the JSW Group and Tata Steel Ltd. are also assessing the option, the people said. Global investors are looking at insolvency cases as there is a thorough legal process of transferring ownership of assets with defined timelines, according to the first of the two people quoted above. Moreover, the assets are available at a reasonable valuation, the person said.
On August 10, Business Standard first reported that ArcelorMittal is eyeing stressed steel assets.
Resolution professionals appointed in Essar Steel and Bhushan Steel didn't respond to emailed queries. An ArcelorMittal spokesperson said the company does not comment on rumours or speculation. POSCO, Tata Steel and JSW Group did not respond to queries emailed on Wednesday.
Interest from large international investors for India’s steel companies is welcome news for banks, currently reeling under growing bad loans, led by the metals and power sectors. As on June 30, gross non-performing assets of all listed banks had crossed Rs 8 lakh crore.
The potential investors are preparing resolution plans for the two companies, which would involve purchasing controlling equity, and will submit them to the respective resolution professionals before the deadline. Satish Kumar Gupta, the resolution professional at Essar Steel, had sought expression of interest from potential investors and people with turnaround plans by October 23. Similarly, Vijaykumar Iyer, the resolution professional at Bhushan Steel, had sought resolution plans by December 23.
In case of Essar Steel, a resolution plan from the promoter Ruia family is also in the works, the second person quoted above said. In November 2015, lenders to Essar Steel tried to find buyers for the company, without success.
Essar Steel India owns an integrated steel plant in Gujarat, with an annual production capacity of 10 million tonne per annum. Bhushan Steel too owns an integrated steel plant in Odisha with an annual production capacity of 5.6 MTPA.
The chance to invest in Indian steel assets may allow the global steel firms to make inroads into the market. So far, attempts by both ArcelorMittal and POSCO to expand their presence in India have had limited success.
ArcelorMittal has been in talks with Steel Authority of India Ltd. on a joint venture proposal since May 2015, without much success. According to a report by wire agency PTI in August, this year, a consensus on signing the joint venture was to be reached in two months. That timeline has already been breached.
POSCO, which was working on developing a steel plant in Orissa, has written to the state government requesting it to take back the 2,700 acre land parcel allotted to it, according to a PTI report in March this year, quoting state government representatives.
Essar Steel and Bhushan Steel were two of the biggest companies to have been admitted to insolvency proceedings earlier this year after the Reserve Bank of India issued two lists of defaulting companies to lenders, recommending that these firms be referred for resolution via the IBC. Ten other cases have also been sent to the National Company Law Tribunal for similar action.