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Tata Steel has committed ₹45,400 crore for Bhushan Steel, far outbidding JSW Living’s offer of ₹28,000 crore for the stressed asset.
This is the first instance of the resolution of a stressed asset under the Insolvency and Bankruptcy Code (IBC), 2016.
Tata Steel has offered to pay Bhushan Steel’s financial creditor ₹35,200 crore, while operational creditors would get ₹1,200 crore.
Tata Steel will invest ₹9,000 crore towards working capital requirements, sources close to the company said.
In a statement issued on Wednesday, Tata Steel said it had received a formal communication from the Resolution Professional of Bhushan Steel Limited that it had been identified the “highest evaluated compliant resolution applicant to acquire controlling stake of Bhushan Steel”.
The next step in the resolution process will be as per stipulations under the IBC’s Corporate Insolvency Resolution Process.
The announcement will come as a major confidence builder for public sector banks, which are struggling to recover loans extended to the highly-leveraged steel sector. Tata Steel’s hefty bid of ₹45,400 crore will imply minimal haircut for Bhushan Steel lenders who had put the company on the block to recover ₹56,000 crore.
For Tata Steel, this could mean that its overall debt could increase further. The company itself has gross debt of ₹88,000 crore as of December quarter and it could cross ₹1 lakh crore in next two-three years. In 2008, Tata Steel had bid for Anglo-Dutch company Corus.
JSW Living is a joint venture between JSW and Piramal Enterprises.
Bhushan Steel, which makes auto-grade steel, has an annual production capacity of 5.6 million tonnes. The company reported a net loss of ₹1,607 crore in the December quarter against net loss of ₹743 crore in the year-ago period.
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