Tata Steel has just pulled off its largest acquisition to date. Pipping JSW Steel - contrary to all speculation - it has reportedly emerged as the highest bidder for Bhushan Steel. The latter, to remind you, was on RBI's first list of 12 companies to be referred to the National Company Tribunal Law (NCLT) and according to the latest Economic Survey, claims admitted under the insolvency proceedings stand at a whopping Rs 55,989 crore, making it the biggest bankruptcy, so far, to go under the hammer. What a coup pulled off by N. Chandrasekaran, the first non-Parsi chairman of the Tata Group in its 150-year-old history, as he begins the countdown to his first anniversary in office.
According to MoneyControl, Tata Steel's surprise bid of Rs 35,000 crore was Rs 5,300 crore more than rival JSW Steel's offer. The aggressive bidding makes sense since Bhushan Steel's annual capacity is 5.6 million tonne - according to its website. It is the third largest secondary steel producer in the country and its acquisition will help Tata Steel tighten its grip on the eastern region. According to advisory firm Bonaz Capital, this acquisition would help it to increase domestic steel capacity by around 43 per cent to 18.6 million tonnes per annum. "We expect the company to report revenue CAGR of 5.3 per cent over FY17-20E [expected] aided by 6.1 per cent volume growth in domestic steel production...EBITDA margins are also likely to expand by [around] 573 bps owing to better utilization for Tata Steel India," it added.
But given that the crippled Bhushan Steel Ltd reported widening of its net loss to Rs 1,607 crore for the quarter ended December 2017, a jump of 116 per cent year-on-year, not everyone is excited by the prospects. Shares of Tata Steel are down 7 per cent since morning. But the share price of Bhushan Steel has jumped up a whopping 20 per cent, the most in three months.
Incidentally, Tata Steel is also the leading bidder for Bhushan Power and Steel. According to The Economic Times, lenders to the company decided that they would only consider Tata Steel's offer of Rs 24,500 crore - which includes an upfront payment of Rs 17,000 crore to lenders, a cash infusion of Rs 7,000 crore to meet the company's working capital requirements and a payout to operational creditors-for further negotiations on Wednesday, setting aside JSW Steel's offer that is lower by Rs 11,500 crore. Sources also told the daily that if Tata Steel does manage to pull off both acquisitions, it might gain half the market share for flat-steel products in the country.
With PTI inputs
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