Tata Steel to bid for Essar Steel’s Hazira operations
At least two domestic and two foreign buyers have expressed interest in the debtladen company
MUMBAI: Tata Steel Ltd has expressed preliminary interest in acquiring debt-laden Essar Steel’s Hazira operations, according to two people directly aware of the talks between Tata Steel and Essar Steel’s lenders.
While the bankruptcy resolution plan of Essar Steel has not been finalised, the National Company Law Tribunal appointed interim resolution professional (from turnaround advisory firm Alvarez and Marsal) for the company has received initial interest from at least two domestic and two foreign buyers, the people cited above said.
Essar Steel Hazira houses is the country’s largest single-location flat steel plant. The complex also houses a 30 million tonnes per annum (mtpa), all-weather, deep draft, dry bulk port and a 515 MW natural gas operated power plant. Built with a total investment of more than ₹30,000 crore, Essar Steel Hazira has a steelmaking capacity of 10 mtpa.
Emails sent to Essar Steel and Alvarez and Marsal remained unanswered till press time.
“The Hazira facility constitutes more than 80% of Essar Steel’s operations while the rest of the facilities are for raw material processing, which Tata Steel sees no value since it already has its own facilities,” one of the two people cited above said.
Apart from the Hazira steel complex, Essar Steel operates a downstream capability hub in Pune, beneficiation plants in Bailadila (Chhattisgarh) and Dabuna (Odisha) and pellet manufacturing plants in Visakhapatnam (Andhra Pradesh) and Paradip (Odisha).
Tata Steel has 13 million tonnes capacity at its two plants in Kalinganagar in Odisha and Jamshedpur and hopes to double it over the next five years, Tata Sons chairman N Chandrasekaran had said in September.
In the same month, Tata Steel announced the merger of its European steel operations with German steel maker Thyssenkrupp AG to create Europe’s second-biggest steel producer.
Mint reported in August that Tata Steel is considering buying stressed steel assets, including Essar Steel, which would give the firm a foothold in west India.
Essar Steel owed lenders around ₹45,000 crore, of which ₹31,671 crore had become nonperforming as of 31 March 2016. The company owes 93% of this amount to a consortium of 22 creditors led by SBI.
In a September interview, Siddharth Shah, partner at corporate law advisory firm Khaitan and Co., said, “Steel appears to be the first one off the block which is showing promise for distressed investors and there are interesting assets within the current 12 cases which actually would attract some of the larger strategic or financial sponsors.”
Mint reported in August that Piramal Enterprises Ltd-bain Capital Credit, AION Capital, Oaktree Capital, Lone Star Funds and SSG Capital have expressed interest in buying a controlling stake in Bhushan Steel.