Bhushan Power: JSW’s biggest lone bet

Bhushan Power & Steel is not just JSW Steel’s most aggressive bet to date but also the only stressed asset under the Insolvency and Bankruptcy Code for which it has gone alone.

For Monnet Ispat & Energy, JSW tied up with AION and the latter was the senior partner. In Bhushan Steel, it had bid with Piramal.

However, JSW has put in the highest offer for Bhushan Power at ~193.5 billion in the rebid and hasn’t opted for a partnership.

It is early days, according to JSW Steel Joint Managing Director and Group Chief Financial Officer Seshagiri Rao, as the matter is pending with the National Company Law Appellate Tribunal (NCLAT) and courts. He, however, confirmed the firm has submitted the bid for Bhushan Power alone.

Bids for Bhushan Power were called in February and JSW, which had then offered ~110 billion to the lenders, had gone solo. The structure cannot be changed in the rebid.

Will it be possible to bring in a partner if JSW wins Bhushan Power? Once lenders get paid and the resolution plan is implemented, there would be no restrictions on changing the structure. Lenders will have to submit the revised bids in a sealed cover to the NCLAT.

Tata Steel has challenged the rebid in the Supreme Court, which is hearing the case, but has refused to stay the process.

“It is very premature to say what is going to happen because eventually NCLAT and courts have to decide. Once those decisions come, of course, we have made arrangements to go ahead,” Rao said, on the financing structure of the deal. But, he added, JSW would be within the debt-Ebitda ratios that it has guided.

JSW’s net debt/Ebitda reduced to 2.26x at the end of June 2018 from 3.76x in the corresponding period a year ago. Yet, Bhushan Power would be, if it materialised, JSW’s most expensive buy. The last big one was in 2010, when JSW acquired Ispat Industries. JSW had acquired a 41.29 per cent stake in Ispat Industries for ~21.57 billion to become the largest steel maker in India. It took JSW’s capacity to 14.3 million tonnes. It was followed by a mandatory open offer to public shareholders. Ispat’s total liability was around ~95 billion. Later, Ispat was merged with JSW.

In 2014, JSW acquired Welspun Maxsteel in a transaction that valued the company at ~10 billion. Welspun had long-term debt of around ~10 billion.

Smaller acquisitions outside India have followed more recently like USbased Acero Junction for $80.85 million and Italy’s Aferpi for ~6 billion. The total enterprise value of Acero transaction, including liabilities, however, was $182.41 million.

Like Ispat, Bhushan Power would help JSW Steel retain its leadership position, and, hence, the big bet.

JSW is currently at 18 million tonnes, and with Monnet, it is at around 19 million tonnes. That’s just marginally ahead of Tata Steel, which recently acquired Bhushan Steel and is now at 18.5 million tonnes.

But with Bhushan Power, which has an installed capacity of three million tonnes, JSW could be comfortably ahead of Tata Steel.