Odisha to stay away from Bhushan bid

The Odisha government has decided to stay away from the sale of Bhushan Steel, which is one of the first 12 companies identified by the Reserve Bank of India (RBI) for insolvency and is slated to receive bids on December 23 from rival companies.

State Bank of India Chairman Rajnish Kumar said the bank had not received any reply to its proposal to the Odisha government to take a 26 per cent stake in the company. “We have not received any response from the Odisha government,” Kumar has told Business Standard.

As Bhushan Steel’s plant is located in Odisha, the bank had requested the state government to pick up a stake.

Bhushan Steel and Bhushan Power and Steel have been sent to the National Company Law Tribunal (NCLT) for resolution under the Insolvency and Bankruptcy Code (IBC) after they had defaulted on a combined debt of ~87,000 crore.

Bhushan Steel is the biggest non-performing asset among the 12 stressed companies that were sent to the NCLT for resolution by the RBI in June this year.

JSW Steel would be making bids for both the companies but is keen to acquire Bhushan Steel, which has a production capacity of 5.6 million tonnes per annum (mtpa). JSW Steel is tying up with JFE of Japan to bid for the Odisha-based company, which has a debt of ~49,957 crore as of March this year. It is also in talks with private equity companies to join its bid.

Tata Steel and ArcelorMittal also are expected to make a bid for Bhushan Steel.

Bhushan Power and Steel has an integrated 3.5-mtpa steel plant with net sales of ~7,699 crore and a debt of ~37,248 crore as of March last year (see chart). The bids for Bhushan Power and Steel are expected on December 22.

JSW, along with AION Capital, is the only bidder for Monnet Ispat.

Banks are expected to take up to a 60 per cent haircut on their exposure to these stressed companies and will have to make 50 per cent provisions for these loans in the current quarter itself. The RBI had directed banks in June to file 12 cases as part of its first list (of which 11 cases have been admitted), and has suggested another 28 cases to be referred to the NCLT by the end of December if they are not resolved by other means.