ArcelorMittal, Tata, Vedanta, JSW in race for the two firms undergoing insolvency process;bankers and IRPs say there are not too many bidders
Essar Steel and Bhushan Steel are attracting the same set of bidders, according to a top executive of a leading consultancy firm.
ArcelorMittal, Tata Steel, JSW Steel and Vedanta have shown interest in both Bhushan Steel and Essar Steel, the executive said.
The two debt-laden steel companies are going through the insolvency resolution process under the provisions of the Insolvency and Bankruptcy Code (IBC). The interest from all the top steel companies stems from the fact that both the plants have robust revenue earnings. While Essar Steel earns a revenue of Rs 70 to Rs 75 crore daily, Bhushan Steel earns about Rs 65 crore to Rs 70 crore a day.
"With competition fierce in the steel sector, there is an acquisition interest, but there are not too many bidders. Essar Steel and Bhushan Steel have good assets. Banks can hope to get a good price if a discount is given," the official said.
The consultancy firm has been appointed as an interim resolution professional (IRP) for a few distressed companies among the list of 12 shortlisted by the Reserve Bank of India (RBI).
"Officials from these companies are already inspecting the plants of Essar Steel and Bhushan Steel," a banker said.
Essar group, the promoter, has also submitted an expression of interest (EoI) for Essar Steel, according to the bankers
"A resolution plan will be submitted to IRP within the scheduled time frame," the Essar Group spokesperson told DNA Money.
There is nothing in the law that prevents existing promoters from bidding for their own assets, but banks say that a detailed feasibility study will be undertaken before deciding on this.
If they can now run the company profitably what was the issue in doing so a year back before the IBC proceedings set in will have to be examined. A forensic audit will be conducted on all the bidders," said a banker who has loans to both Essar Steel and Bhushan Steel.While Essar steel owes over Rs 37,000 crore to the banks, Bhushan steel has loans of over Rs 44,000 crore.
The companies eyeing Bhushan Steel will also have to submit their resolution proposals by December. Bhushan Steel is is India's third-largest secondary steel producing firm with a production capacity of 5.6 million tonne per annum (mtpa). Essar Steel has a production capacity of 10 mtpa.
"Both the steel plants are state-of-the-art and bring in sufficient revenue. But the debt was so high right from the beginning that they were not able to repay it," said a banker who is helping the IRPs to manage the companies until they is taken over by a new management or brought under a reformed existing management.
The government made some amendments to the IBC last week to prevent the existing promoters trying to make an entry into their own companies through some distressed funds or investment companies. These may effectively check that the defaulting promoters do not get back their company by manipulating the loopholes that may exist in the new law.
After the first list of 12 cases RBI has shortlisted another 38 cases to be resolved through the IBC by December 2017. But bankers are busy trying to resolve the cases either through one-time settlements or initiating recovery proceedings against the company to avoid going to the NCLT, where the decision will depend on the court.
CONCRETE GAINS
- Suitors keen to acquire Essar Steel which has daily revenue Rs 75 crore and Bhushan Steel that earns Rs 70 crore daily
- Essar Group has also submitted an expression of interest for Essar Steel
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