JSW Steel closes Bhshan Steel resolution, becomes India's biggest steelmaker
30 March 2021
JSW Steel is reported to have closed the acquisition of Bhushan Power and Steel Ltd (BPSL) by depositing an amount of Rs19,350 crore i the proposed escrow account, more than two years after lenders approved a debt resolution plan in late 2018.
The transaction, however, is subject to the condition that banks provide JSW Steel indemnity in case of an adverse ruling from the Supreme Court, where the Bhushan Power case is still being heard. Lenders are reported to have accepted the condition to return the entire sum to JSW Steel in case the apex court ruled against it.
The acquisition of Bhushan Steel’s three million tonne annual capacity in Jharsguda, Odisha, the Sajjan Jindal-promoted JSW Steel would become the country’s top steelmaker, with a total capacity od 22 mtpa. The company’s 5 mtpa expansion project is on track to start in the next few months.
Lenders to BSPL will be recovering 41 per cent of their total exposure of Rs47,141 crore. State Bank of India (SBI) will be the biggest beneficiary with admitted claims of Rs9,825 crore, followed by Punjab National Bank (Rs7,355 crore, including claims of OBC, and United Bank of India which were merged into PNB), Canara Bank (Rs3,991 crore, including claims of Syndicate Bank which was merged into Canara Bank), Union Bank of India (Rs3,497 crore, including merged banks Andhra bank and Corporation Bank), Indian Bank (Rs3,083 crore, including thayt of Allahabad Bank), Bank of Baroda (Rs2,606 crore).
JSW Steel has raised the resolution amount through a mix of debt, equity and optionally convertible instruments. A sum of Rs8,614 crore has been arranged in Piombino Steel (PSL), a unit of JSW Steel, which will hold 100 per cent of the equity share capital in BPSL following an issue of equity shares of Rs100 crore and compulsory convertible debentures of Rs8,450 crore by BPSL to PSL.
“The acquisition is part of inorganic growth strategy of the company. Through this acquisition the company will establish its presence especially in flat steel business in the eastern region in India,” JSW Steel said.
The acquisition comes at a time when global steel prices are ruling firm and are at ten-year highs in China and Europe. JSW Steel posted record steel margins in Q3FY21, led by the sharp increase in prices and is expected to end the year with consolidated sales of close to Rs 77, 300 crore on the back of sales of Rs 72,610 crore in FY20.
Bhushan Power was one of the first list of a dozen defaulters identified by RBI to be sent to NCLT for resolution. The NCLT had cleared JSW Steel's resolution plan for BPSL in September 2019, but the case has seen been stuck in courts.