GFG Alliance ventures into the Indian steel market with pair of acquisitions

There were two major developments in the Indian steel sector this week.
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Indian-born British businessman Sanjeev Gupta’s GFG Alliance made its first foray into the Indian market. It completed the strategic acquisition of two mills, Adhunik Metaliks Ltd and Zion Steel, in an approximately U.S. $60 million (Rs 425 crore) cash deal.

Speaking to Business Standard, Gupta explained these purchases were important in their global steel strategy. India, he said, was one of the fastest-growing steel markets in the world. His company was now introducing the GREENSTEEL model there to “create a competitive, sustainable operation” to serve the local market.
The GREENSTEEL model aims to revive the steel plants by combining steel recycling with low-carbon and renewable power sources in order to create a more sustainable, competitive operation serving local markets.
Elsewhere in the steel sector, a year after it was declared a winner in an auction, India’s JSW Steel Ltd. was finally allowed to take over the insolvent Bhushan Power & Steel Ltd.
India’s National Company Law Appellate Tribunal permitted JSW Steel to acquire Bhushan Power & Steel for about U.S. $2.79 billion (Rs 19,700 crore). It also provided it immunity against future litigations after the insolvent company was named in alleged accounting fraud. However, over the last one year the Sajjan Jindal-led steel mill’s debt has increased, while domestic demand for the alloy has declined, according to BloombergQuint.
Coincidentally, over the last few years, Gupta’s Liberty Group, too, had attempted to acquire assets put up for auction under the Insolvency and Bankruptcy Code (IBC), including Bhushan Power and Steel, Amtek Auto and ABG Shipyard.
Amtek Auto was bagged by Liberty. However, in Amtek, the resolution plan was not implemented, forcing reopening of the process. Lenders to Amtek recently voted in favor of a resolution plan submitted by U.S.-based hedge fund Deccan Value Investors LP. Liberty, though, is still fighting a case on grounds of an inflated valuation.
Adhunik is an integrated steel plant in the Odisha province of India, with a steelmaking capability via blast and electric arc furnaces and a 34 MW captive power plant. Adhunik, along with Zion Steel, has a combined rolling capacity of 400,000 tons per annum. The sites produce products for the automotive, energy, engineering, and oil and gas sectors.
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In the case of Bhusan Power & Steel, JSW will now focus on a quick ramp-up of operations so that Bhushan’s scale will go up by almost 7-8 million tons in the next six months (assuming it can take control of Bhushan Power & Steel by that time).