How Tata Steel turned around bankrupt Bhushan Steel

How Tata Steel turned around bankrupt Bhushan Steel

Thanks to the strong financial performance, TSBSL share price has doubled to Rs 103 in the last one month; the once bankrupt firm has a market capitalisation of over Rs 10,000 crore at present

Erstwhile Bhushan Steel, which was run by Brij Bhushan Singal and his younger son Neeraj Singal, had been accumulating losses and defaulting loans when the company was taken to bankruptcy court in 2017. The lenders and other creditors claimed over Rs 63,000 crore from the company. But Tata Steel, which acquired the company through the insolvency resolution process, has turned around it in just two financial years, despite the economic troubles inflicted by COVID-19.

Tata Steel BSL (new name of Bhushan Steel) recently posted manifold jump in its consolidated net profit at Rs 1,913.73 crore for the fourth quarter ended March 31, 2021, mainly on the account of higher income. It reported a consolidated net profit of Rs 5.93 crore in the year-ago period. The total income increased to Rs 7,348.66 crore in FY21, from Rs 4,288.87 crore in the year-ago period.

Thanks to the strong financial performance, the share price of TSBSL almost doubled to Rs 103 in the last one month, following the result for March quarter and FY21. The once bankrupt firm has a market capitalisation of over Rs 10,000 crore at present.

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Tata Steel acquired BSL for Rs 35,200 crore in 2018. Post the acquisition of TSBSL in mid-2018, Tata Steel had initiated steps to improve productivity across value chain. It included throughput maximisation, optimisation of resource consumption, energy efficiency improvement and enhanced waste reduction. It had also optimised operating cost and working capital, besides enriching product mix.

For accelerating operational efficiency, Tata Steel re-designed the organisational structure and created dedicated functional departments within a month of acquisition for safety, environment, CSR, vigilance and ethics, human resources, transformation, shared services, and industrial by-product management, among others.

TSBSL has leveraged synergy with Tata Steel. Leveraging synergies included increasing use of captive raw material, combined cargo planning (inbound and outbound), inter-plant synergies, and manufacturing of Tata Steel branded products at Tata Steel BSL plants at arm's length.

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According to the company, some of the key enablers deployed for transformation have been de-bottlenecking and de-coupling of the operations, embedding plant predictive maintenance framework, restarting idle assets such as DRI and ConArc, benchmarking operating key performance indicators (KPIs), among others.

Since acquisition, TSBSL has spent around Rs 400 crore in capex towards the safety, environment and sustenance projects. The capex has been funded by Tata Steel BSL through its internal accruals.

For captive power supply, the company also acquired 99.9 per cent stake in Bhushan Energy Limited (now known as Anugul Energy Limited) for Rs 765 crore in the insolvency resoution process in 2019.

The gross debt of erstwhile Bhushan Steel was Rs 63,020 crore. The debt stands at Rs 17,651 crore at present. Post acquisition the external debt has been reducing and the company has pre-paid some of its debt.

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