JSW Steel group closed a Rs 19,350-crore transaction with lenders to acquire Bhushan Power & Steel (BPSL) on Friday, ending a corporate insolvency resolution process (CIRP) that has stretched more than three and a half years.
The Rs 19,350-crore transaction has been funded by a mix of equity and debt. As part of the payment, a sum of Rs 8,614 crore in Piombino Steel Limited (PSL) was arranged through a mix of equity, optionally convertible instruments and debt. Of this, an amount of Rs 8,550 crore was invested in a special purpose vehicle (SPV), Makler Private Limited, the bidding company; the balance Rs 10,800 crore was funded by debt.
JSW informed the stock exchanges that following the implementation of resolution plan that included payment of Rs 19,350 crore to financial creditors of BPSL and merger of the SPV, PSL holds 100 per cent equity shares in BPSL.
Seshagiri Rao, joint managing director and chief financial officer, JSW Steel, said that the company takes charge of the asset today.
In a letter to BPSL employees, Sajjan Jindal, chairman of JSW group said that BPSL was the largest acquisition in the history of JSW Steel. “This acquisition not only aligns with our core business and purpose but also establishes our presence and accelerates our growth vision in eastern India,” he said.
“I am aware how difficult it is to build a greenfield steel plant of this size and this asset is indeed a testament to your tireless efforts,” he further said.
The deal with lenders concluded even as litigations are pending before the Supreme Court as both sides wanted to close the transaction before March 31.
Lenders - who waited one and a half years after the National Company Law Tribunal (NCLT) approved JSW Steel’s resolution plan for payment - would stand to realise 41.03 per cent on claims of Rs 47,157.99 crore.
The top financial creditors are SBI with an exposure of Rs 9,825 crore, PNB Rs 7,355 crore (including claims of Oriental Bank of Commerce and United Bank of India after merger), Canara Bank Rs 4,018 crore (including claims of Syndicate Bank), Union Bank Rs 3,497 crore (including claims of Andhra Bank and Corporation Bank) and Asset Care & Reconstruction Enterprise Rs 5,275 crore; SBI is expected to recover around Rs 4,000 crore.
BPSL was among the first 12 big-ticket non-performing assets (NPAs) mandated for resolution by the Reserve Bank of India (RBI) under the Insolvency and Bankruptcy Code (IBC).
To close the transaction, most lenders voted in favour of a proposal on March 5, to accept payment according to JSW Steel’s resolution plan with an undertaking to refund the amount in the event the Supreme Court gives an adverse order.
The deal would provide for 47.69 per cent of Rs 733.76 crore claims of operational creditors.
The 2.5 million tonne BPSL plant in Jharsuguda, Odisha would put JSW Steel ahead of top steelmaker, Tata Steel (20.6 million tonnes), if the one million tonne Monnet Ispat & Energy (jointly acquired with AION as majority partner) is included. JSW Steel has an 18 million tonne capacity.
It also gives JSW a foothold in the east.
Rao said that JSW Steel plans to commission its five million tonne expansion at Dolvi (Maharashtra) before June 2022. That would take its capacity to 26.5 million tonnes.
Jindal’s letter also mentioned that the contribution of BPSL employees will be key in bolstering the ambitious growth plans of achieving 45 MTPA capacity well ahead of the 2030 timeline.
However, even as JSW Steel closed the transaction with lenders, it still has the Supreme Court hurdle to cross. Applications filed by former promoter, Sanjay Singal, and the Enforcement Directorate (ED) are pending before the Supreme Court.
The ED stepped in about a month after JSW’s resolution plan was approved by the National Company Law Tribunal (NCLT) and attached assets of BPSL valued at Rs 4,025.23 crore under the Prevention of Money Laundering Act (PMLA). The money laundering probe was based on a bank fraud case registered by the Central Bureau of Investigation (CBI) in early 2019.
The National Company Law Appellate Tribunal (NCLAT) directed release of the assets, but the ED opposed it. Singal’s appeal against JSW Steel’s resolution plan is also before the Supreme Court.
According to the contours of the arrangement with lenders, in case of any adverse order from the apex court, the amount transferred would have to be returned to JSW.
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