Tatas most eager suitor for stressed steel assets
Tata Steel has emerged as the most aggressive bidder among the companies eyeing stressed steel assets that are undergoing insolvency proceedings.
Among the firms that have submitted expressions of interest (EoIs) for the companies admitted under the National Company Law Tribunal (NCLT), Tata Steel is the only investor to participate in four assets — Bhushan Power & Steel, Monnet Ispat & Energy, Electrosteel Steels, and Essar Steel.
The only other steel company among the 12 large accounts recommended by the Reserve Bank of India for insolvency for which the deadline is not yet over is Bhushan Steel. Tata Steel is expected to throw its hat in the ring for Bhushan Steel as well.
A Tata Steel spokesperson said, “As a process, we do assess and evaluate various strategic opportunities for growth. This is an ongoing process in the company.”
Tata Steel has set a target of doubling capacity to 26 million tonnes (mt) in the next five years through a mix of organic and inorganic options. In Kalinganagar, while it would be taking up the second phase of expansion, in Jamshedpur it would be adding 1 mt through debottlenecking. It current capacity is 12.7 mt. However, to double the capacity in a short span of time, inorganic options would be considered, and the insolvency process has provided an opportunity.
“Tata Steel has recently commissioned the first phase of its Kalinganagar project, and is now in the process of implementing the second phase of the same. But the company wishes to grow its Indian steelmaking operations further, and has, therefore, evinced interest in buying stressed assets,” ICRA Senior VicePresident Jayanta Roy said.
A source said Tata Steel’s current strategy was that it would not like to skip any opportunity and was submitting EoIs for all firms. Later, it could decide which ones to bid for, the source added. After EoIs are submitted, prospective bidders will be shortlisted. Then, an information memorandum will be circulated among the bidders and the data room will be opened. Finally, the bidding will take place.
Tata Steel had earlier evinced interest in Electrosteel Steels when lenders applied the strategic debt restructuring route. Electrosteel Steels, Bhushan Power, and Bhushan Steel have facilities in Jharkhand and Odisha where Tata Steel has mines. From that context, acquiring any of these assets would make sense for it. On the other hand, Essar Steel would provide Tata Steel with a base in the west.
Tata Steel would, however, have to fight with other suitors. JSW Steel, currently the largest steelmaker in the country, is looking to widen the gap with competitors, and is focusing on assets in the east. It has submitted EoIs for Monnet, and Bhushan Power, and is expected to bid for Bhushan Steel.
Vedanta and ArcelorMittal appear to be eyeing plants of significant scale. Vedanta has submitted an EoI for Bhushan Power. An email sent to Vedanta went unanswered. ArcelorMittal is understood to have submitted an EoI for Essar Steel and evinced an interest in Bhushan Steel. An ArcelorMittal spokesperson could not be reached for comment.
“The interest reportedly shown by a number of both domesticand international steel players in stressed steel assets in India possibly points to their expectation of an improvement in industry conditions in the medium term. Moreover, the plants on offer can ramp up production faster than greenfield or brownfield projects, and can feed the growing requirements of India’s automobile, infrastructure and construction sectors,” Roy said.