Tata Steel has offered to shell out Rs 36,400 crore for its acquisition of Bhushan Steel, the debt-ridden 5.6-mtpa steel firm promoted by the Singal family. This includes Rs 35,200 crore to be paid to Bhushan Steel’s financial creditors and Rs 1,200 crore to its operational creditors. The troubled firm owes Rs 56,080 crore to its financial creditors and Rs 3,488 crore to operational creditors. This means if Tata Steel’s resolution plan is approved by the National Company Law Tribunal (NCLT) and subsequently by the competition commission, which now appears to be just a formality, Bhushan Steel’s financial creditors including State Bank of India, Punjab National Bank and others will have to take a 37% haircut, while its operational creditors will have to take a 66% hit on their exposure.

As per Tata Steel’s resolution plan communicated to the committee of creditors (CoC), which submitted the plan at the NCLT on Wednesday, the Tatas also intend to retain all existing employees of Bhushan Steel, post-acquisition and bring in funds as and when required to run the acquired company. Presenting Tata Steel’s resolution plan to NCLT, Gaurav Banerjee, the counsel appearing on behalf of the CoC, said the its bid for Bhushan Steel was Rs 8,000 crore or 39% more than what JSW Steel was willing to put in. The two-member principal bench of NCLT, headed by its president Justice MM Kumar, has ordered other parties to reply to the resolution plan before the next hearing slated on April 2.

Analysts said although Tata Steel’s bid looks expensive, it made strategic sense for the company as it will help it to increase its market share in the auto- and value-added steel market and give optionality for further growth. The acquisition will also put Tata Steel in the forefront among country’s private sector steel firms. Currently, with 18 mtpa capacity, JSW Steel is ahead of Tata Steel, with which has 13 mtpa capacity. The acquisition of Bhushan Steel itself will make the company the largest private-sector steel maker in the country. Bhushan Steel’s primary steel plant is located in iron ore-rich Odisha. Though the firm does not have captive iron ore, it has downstream processing facilities in northern and western India, closer to the key consumption hubs in autos and white goods and also close to ports. The company reported a net loss of Rs 3,614.8 crore in FY17 on revenues of Rs 15,027 crore.