Re­vival of Like-by-Like a De­cent Prospect

The Economic Times - - The Edit Page -

JSW Steel, which has big brown­field ex­pan­sion plans, is re­port­edly mak­ing a bid for Bhushan Steel, in tie-up with Pi­ra­mal En­ter­prises’ stressed as­sets fund with Bain Cap­i­tal. With its solid pres­ence in high-end steel, JSW Steel is a ben­e­fi­cial suitor for Bhushan Steel, which is heav­ily into auto-grade steel, and so, likely to of­fer a bet­ter ac­qui­si­tion price as well. Ac­qui­si­tion by an­other steel com­pany would be prefer­able to ac­qui­si­tion by a fi­nan­cial in­vestor. A quick turn­around of stressed as­sets like Bhushan Steel is de­sir­able, so that valu­able as­sets are quickly de­ployed pro­duc­tively. And Bhushan Steel is among 12 stressed as­sets iden­ti­fied by the Re­serve Bank of In­dia for im­me­di­ate bank­ruptcy res­o­lu­tion. Mean­while, the steel in­dus­try in In­dia has re­port­edly emerged as one of the world’s largest, with pro­duc­tion ca­pac­ity of over a 100 mil­lion tonnes per an­num, which is ex­pected to touch150 MT by 2020. How­ever, steel is a cap­i­tal-in­ten­sive cycli­cal in­dus­try, and we need more brown­field ex­pan­sion to reap scale economies. Hence the greater need for in­tra-in­dus­try merger and ac­qui­si­tion ac­tiv­ity in the steel in­dus­try here. It is also wel­come that UK-based met­als spe­cial­ist, San­jeev Gupta of Lib­erty House, has re­port­edly bid for stressed as­sets here and has plans to in­vest in sec­tors such as re­new­able en­ergy, ship­ping and ports, and in­fra­struc­ture. Mean­while, JSW Steel has out­lined its strat­egy to have 40 MT of steel ca­pac­ity within a decade, with fo­cus on brown­field ex­pan­sion. It has also tied-up with JFE Steel Corp of Ja­pan to make auto steel. As for Bhushan Steel, it is into cold-rolled prod­ucts and does make the widest sheets, but seems to have op­er­a­tionally slipped in the face of lack­lus­tre de­mand in the trough of the steel cy­cle. When the chips are down, things can only look up.

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