While delays in the resolutions under the Insolvency and Bankruptcy Code (IBC) are hurting banks, successful cases in the steel sector (Essar Steel being the latest) are lending some comfort. Tata Steel taking over Bhushan Steel, JSW Steel acquiring Monnet Ispat and Vedanta buying Electrosteel Steels are instances of early success stories under IBC, offering decent recoveries to lenders.

But how have once- ailing steel companies performed under the stewardship of their new owners ? We look at key metrics to find out.

Tata Steel-Bhushan Steel

Tata Steel’s ₹35,132-crore resolution plan to take over Bhushan Steel’s assets emerged as a flagship case for the IBC resolution process. Tata Steel acquired 72.65 per cent stake in Bhushan Steel through its wholly owned subsidiary, Bamnipal Steel.

Before this, Bhushan Steel was operating at a capacity of nearly 3.5 million tonnes per annum (mtpa) and had an installed capacity of about 5.5 mtpa. Though it was reporting net losses due to high interest burden, it was profitable at the operating level. Thus, Tata Steel expected to revamp the operations with marginal capital expenditure of ₹600-700 crore. As such, it was projected that the operating profit earned from Bhushan Steel would be enough to cover the interest on the acquisition cost and depreciation to an extent.

Bhushan Steel’s acquisition happened mid-way through the first quarter of FY19 (on May 18, 2018). The company, under the management of Tata Steel, put up a good show from the very beginning. Its operating profit per tonne in the first quarter after the acquisition more than doubled to about ₹10,000 per tonne, against the ₹4,000 per tonne in FY18.

It crossed ₹11,000 per tonne in Q3 FY19 when the steel market was good. In fact, the realisations of Bhushan Steel were better than Tata Steel’s due to the former’s rich exposure to high value-added downstream products such as hot-rolled, cold-rolled and coated steel, wire, rods, tubes and wires. But profitability was lower due to higher costs.

Tata Steel managed to turn the negative cash profits of Bhushan Steel to positive — a cash profit of ₹3,154 crore in FY19 against cash losses of ₹27,349 core in FY18 and ₹2,439 crore in FY17. There was also an improvement in key operational indicators such as fuel and power consumption rates in Bhushan Steel.

However, a weak steel market has adversely impacted the performance of Bhushan Steel this fiscal. In Q2FY20, revenue and operating profit fell 22 per cent and 55 per cent y-o-y to ₹4,555 crore and ₹527 crore, respectively. The drop in profitability per tonne to ₹5,062 has raised concerns. Going ahead, Tata Steel plans to merge Bhushan Steel for synergy in raw material procurement, selling and administrative expenses.

JSW Steel-Monnet Ispat

JSW Steel joined hands with a private-equity firm, AION Capital, and infused ₹2,875 crore into Monnet Ispat. This gave JSW Steel a shareholding of 23.1 per cent, which was treated as an investment in a joint venture.

Before acquisition, Monnet Ispat’s performance was dismal. In 2011, it increased its debt to fund capacity expansion. The company’s debt stood at ₹12,262 crore towards the end of FY17. It had consistently been recording losses since FY15, leading to erosion in net worth. The company had 1.5 mtpa of finished steel-making capacity at the time of acquisition. Soon after the acquisition, closed production units of Monnet — a filter plant, a blast furnace, an electric arc furnace and a bar mill — were restarted.

The products from Monnet’s DRI (direct reduced iron) plant and pallet plant are used in manufacturing TMT bars (finished product). In Q2 FY20, production from Monnet’s DRI plant and the pallet plant increased to 182 kilo tonne (kt) and 410 kt, up 33 per cent and 10.2 per cent, respectively compared with quarter- ended March 2019, when Monnet was acquired by the consortium. The pallet plant, which was commissioned for 2 mt per annum, is now being expanded to 2.5 mt.

But with prices of TMT bars dropping sharply, Monnet is not yet profitable, despite good margins from the output of the DRI and pellet plants. JSW Steel is undertaking efforts to make Monnet profitable, which may yield some results over the next year or so.


Vedanta, a diversified metal and mining company, complemented its portfolio by adding Electrosteel Steels with a capacity of 1.5 mt. Vedanta acquired 90 per cent stake in Electrosteel through a wholly owned subsidiary, Vedanta Star.

Electrosteel’s troubles began with its plan to set up a greenfield plant at a cost of ₹11,000 crore in Jharkhand. The project ran into regulatory delays, leading to cost over-runs. Further downturns in the steel price cycle eroded the company’s capability to service the large debt. Mounting losses over many years had completely eroded its net worth.

Electrosteel had a production run rate of 1.3 mt (capacity utilisation of 86 per cent) in Q2FY19, the first full quarter after acquisition by Vedanta. Soon, Vedanta managed to reach 100 per cent utilisation rate with production run rate recorded at 1.5 mtpa in the first quarter of FY20.

This turnaround at Electrosteel is at a marginal capital expenditure, as per the management of Vedanta. However, the slowdown in the steel sector played spoilsport.

The operating profit per tonne for Electrosteel in the quarter ended September 2019 was $23 per tonne, as against $90 and $120 per tonne recorded in Q2 FY19 and Q3 FY19, respectively. To improve the realisations, Electrosteelrecently launched its re-branded value-added steel portfolio with TMT bars, wire rods and ductile iron pipes. Work is in process to ramp up the capacity from 1.5 mtpa to 2.5 mtpa, for which a technical feasibility study has been completed.