"The acquisition is part of inorganic growth strategy of the company. Through this acquisition the company will establish its presence especially in flat steel business in the eastern region in India," JSW Steel said.
JSW Steel on Friday finally closed out the acquisition of Bhushan Power and Steel (BPSL) for an amount of Rs 19,350 crore, more than two years after lenders had approved its resolution plan in late 2018. With this, the Sajjan Jindal-promoted JSW Steel becomes the country’s top steelmaker as it adds an annual steelmaking capacity of three million tonne per annum (mtpa) in Jharsguda, Odisha. This would take its total capacity to 22 mtpa, according to Seshagiri Rao, joint MD and Group CFO. The company’s 5 mtpa expansion project is on track to start by Q1FY22.
The acquisition comes at a time when global steel prices are ruling firm and are at ten-year highs in China and Europe. JSW Steel posted record steel margins in Q3FY21, led by the sharp increase in prices and is expected to end the year with consolidated sales of close to Rs 77, 300 crore on the back of sales of Rs 72,610 crore in FY20. “The acquisition is part of inorganic growth strategy of the company. Through this acquisition the company will establish its presence especially in flat steel business in the eastern region in India,” JSW Steel said.
The transaction will see lenders to BSPL recovering 41% of the company’s total debt of Rs 47,141 crore. As they have provided for BSPL’s dues, the recovery will be a write-back for them. State Bank of India (SBI) will be the biggest beneficiary with `9,825 crore of admitted claims followed by Punjab National Bank’s (PNB) Rs 4,399 crore. Similarly, Canara Bank has an exposure of Rs 2,244 crore while Bank of Baroda has admitted claims of Rs 1,909 crore.
JSW Steel had earlier requested lenders to provide it indemnity in case of an adverse ruling from the Supreme Court, where the BPSL is beign heard. On March 5, creditors had voted in favour of accepting JSW’s terms of returning the resolution amount, in case of an adverse ruling from the top court.
The resolution amount has been arranged by JSW Steel through a mix of debt, equity and optionally convertible instruments. A sum of Rs 8,614 crore has been arranged in Piombino Steel (PSL), a unit of JSW Steel and PSL will hold 100% of the equity share capital in BPSL following an issue of equity shares of Rs 100 crore and compulsory convertible debentures of Rs 8,450 crore by BPSL to PSL.