Tata Steel wins bid to acquire Bhushan Steel, but deal's financial details not disclosed

Judging by recent developments in the insolvency journey of Binani Cement, one may think that go-ahead from a stressed asset's Committee of Creditors (CoC) does not mean much. But Tata Steel might have better luck in its attempt to acquire the debt-laden Bhushan Steel Ltd under the Insolvency and Bankruptcy Code.

The salt-to-software conglomerate Tata Group's steel business has announced this morning that that it has been declared the successful resolution applicant by the CoC of Bhushan Steel, subject to obtaining necessary regulatory approvals. In its stock exchange filing, Tata Steel added that it has accepted the Letter of Intent for Bhushan Steel.

This may feel like deja vu to those following this drama closely - two weeks back Tata Steel had announced pretty much the same thing. A company statement had said that the CoC had identified it as the highest evaluated compliant resolution applicant to acquire controlling stake of BSL at a meeting on March 6, adding that the next steps would be as per the stipulations under the Corporate Insolvency Resolution Process.

But, even as Tata Steel kick-started talks on finalising its resolution plan with the resolution professional and the CoC, the employees of the beleaguered company approached the NCLT with their objections. During the proceedings, senior advocate A.S. Chandhiok appearing for BSL employees submitted before the two-member NCLT bench that Tata Steel is an 'undischarged insolvent' and is not entitled under section 29 A of the IBC Code. The Tribunal had then directed the CoC to consider the objections raised by the employees. The latter reportedly had a meeting on March 20 and voted for Tata Steel a second time.

Although Tata Steel did not disclose the financial details of the bid, two people close to the bidding process earlier told Mint that the company has offered close to Rs 34,800 crore as upfront payment to banks and an additional Rs 1,200 crore to the operational creditors. In addition, Tata Steel has also offered 12% equity stake to lenders in BSL, who were owed Rs 44,478 crore.

BSL, which was on the RBI's first list of 12 companies to be referred to bankruptcy court, claims to be India's third largest secondary steel producer with an annual capacity of 5.6 million tonnes. So if the deal finally goes through, this acquisition will not only help Tata Steel tighten its grip on the country's eastern region but perhaps also help it to snatch the title of 'India's largest steel maker' from JSW Steel. According to advisory firm Bonaz Capital, the acquisition would help it to increase domestic steel capacity by around 43 per cent to 18.6 million tonnes per annum.

This announcement will also bring much relief to fraud-ravaged Punjab National Bank, as it was the term loan consortium leader for Bhushan Steel. In fact, PNB reportedly had an exposure of close to Rs 5,000 crore, much of which will now come back to coffers and help it to partly offset the damage allegedly wrought by Nirav Modi over the past seven years.

With PTI inputs