Sanjeev Gupta’s financial woes may hit AP steel plant plan

PALAK SHAH Mumbai | Updated on March 15, 2021

Sanjeev Gupta   -  REUTERS

The UK steel tycoon had entered into a joint venture with the State govt

The mounting financial troubles for Sanjeev Gupta, the UK steel tycoon, is likely to be a dampener for one of the largest steel projects of the Andhra Pradesh government, investment bankers and loan arrangers told BusinessLine.

Greensill Capital, the main lender to Gupta’s businesses, has mentioned in its bankruptcy filings that Gupta’s operations were in “financial difficulty” and defaulting on debt. While Gupta had declined to comment on the claims and his umbrella business GFG Alliance has said that it had adequate funding, the workers of Gupta’s flagship Liberty Steel in UK have been put on a furlough.

YSR Steel is a nearly $2-billion joint venture (JV) between the AP government and Gupta’s Liberty Steel. The plan is to set up a 3 million tonnes annual capacity steel plant in Kadapa district. Reportedly just last month, the AP government had approved a partnership with Liberty Steel, which was to bring more than ₹10,000 crore for the project. However, this cash generation of nearly $2 billion now seems uncertain going by the recent developments at Liberty Group, the investment bankers said.

Financial stress

Liberty Steel is under such an acute financial stress in the UK that it does not have money to pay wages to its steel plant workers. Hundreds of workers at the Liberty’s Rotherham and Stocksbridge units have been placed on furlough from last week, putting them on 80 per cent pay on the UK government’s Covid retention scheme. The factories are owned by Liberty..

The Cambridge-educated India-born UK businessman made some bold acquisitions in the past to build the UK's third largest steel company.

Liberty Steel has tightened credit terms for customers of its Scottish operations as Gupta’s GFG Alliance is seeking working capital following the collapse of its biggest lender Greensill Capital. At least one of Liberty’s key suppliers have placed stricter credit terms on the business, the Times of London reported. Greensill is a financial services firm that lends to blue-chip companies via supply-chain finance, an arrangement like cash advance that helps when payments are due from customers.

Greensill has filed for bankruptcy ensnaring global giants like Softbank Group, Credit Suisse Group AG and Toyko Marine. Greensill was among the largest financiers for Gupta’s businesses.

“If Gupta does not manage to raise the cash needed for the Kadapa plant, AP government will have to look for another partner and float bids again. For now the future of the Kadapa steel plant is uncertain,” the investment banker said. An e-mail sent to Liberty Steel remained unanswered

Published on March 15, 2021

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