Big Names of Steel Look to Acquire Stressed Indian Steel Assets

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Steel is the buzzword in India these days.

In addition to increased uptake, the revival in the steel cycle has also led to an unlikely output – many steel majors are now showing renewed interest in acquiring stressed Indian steel assets that have been put on the block for loan default.

Now, Indian steel is seeing an uptick in sales after almost a decade.

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The renewed interest in steel plants that are in a financial mess and have been put up for suitors is logical, analysts say, since most are going for approximately U.S. $600 per ton, while the rate to set up a new steel plant is almost about U.S. $800 per ton. Not to mention that buying an already up and running steel company means no hassles of taking government and other permissions.

What adds icing to the cake is many of these stressed assets are on the block for nothing else than the fact that most were set up at high costs, and other operational reasons.

Foremost in the race is Tata Steel Ltd., with its highest bid for the insolvent Bhushan Steel Ltd. and Bhushan Power & Steel Ltd. The former has offered to pay up to about U.S. $ 7 billion (Rs 45,000 crore) for Bhushan Steel and about U.S. $3.7 billion (Rs 24,500 crore) for Bhushan Power. Others are Numetal Mauritius, a company having VTB Bank as a majority shareholder and the Ruias as a minority partner, and ArcelorMittal for the stressed Essar Steel. Tata’s last major acquisition was the U.S. $13.5-billion Corus deal in 2007.

Tata Steel currently has 13 million tons per annum (MTPA) capacity; if it managed to grab the two Bhusan plants, it could add about 8.0 MTPA.

Bhushan Steel was sent for debt resolution by its lenders after the company failed to repay its dues worth about U.S. $8.62 billion (Rs 560 billion) under the Insolvency and Bankruptcy Code 2016.

But according to a report in The Hindu Businessline, there is now one hiccup in Tata’s path.

Bhushan’s lenders have invited the U.K.-based Liberty House to also submit its bid for the assets, well after the deadline, which was Feb. 8 this year. Only JSW Steel and Tata Steel had submitted bids by the deadline.

Quoting a Liberty House spokesman, the report said it had been invited by the lenders to bid for both the Bhushan assets, and would be doing so within a fortnight.

When asked why the company had failed to bid before the deadline, the spokesperson said Liberty House had been finalizing its India strategy.

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In mid-February, ArcelorMittal India Pvt Ltd (AMIPL) submitted its offer for Essar Steel, which includes a detailed investment plan to address the operational issues in Essar’s existing asset base. The company has expressed confidence that with its industry expertise and “renowned operating prowess,” it was best equipped to implement a successful turnaround, which would be beneficial to Essar’s stakeholders.

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