JSW to bid today with Piramal Enterprises for Bhushan Steel; JFE withdraws

JSW Steel and Piramal Enterprises will be bidding jointly on Saturday for Bhushan Steel, the stressed asset put for sale under the Insolvency and Bankruptcy Code (IBC). JFE, which was in discussion to take majority exposure in the consortium, has withdrawn from the process. 

Bhushan is the biggest among the non-performing assets of Indian lenders among the list of 40 companies the Reserve Bank of India had directed be sent to the National Company Law Tribunal for debt resolution. 

Sources said the letter from JFE came last week. Sajjan Jindal's JSW would be leading the consortium and has put its might behind the bid. Since JFE was to be the lead partner with 51 per cent, an undertaking was required, which might have been a deterrent, said a source.

There are other issues introduced in the bidding process by the lenders, none of which are in the IBC guidelines. For instance, forfeiture of the bid bond guarantee. When a bid is placed, Rs 50 crore has to be paid; if successful, then within seven days a bid bond guarantee of Rs 500 crore has to be provided. The amount could vary for other corporate debtors. If unsuccessful, the amount would be forfeited and discussion with the second highest bidder would resume.

In the new structure, JSW would have a majority in the entity. Sources indicate JFE's pullout would not impact the JSW-Piramal bid, as funds had already been arranged.

One of the lead lenders, Punjab National Bank, had sought extension of the bid deadline but this has not been granted. The deadline has already been extended twice.

The bids are likely to be twice the liquidation value of Rs 150 billion, say sources. Anil Agarwal's Vedanta is also expected to bid. Tata Steel and ArcelorMittal had also done a due-diligence of Bhushan; whether they finally bid would be known on Saturday.

Bhushan's annual steel making capacity is 5.6 million tonnes. The company is a long-term supplier to Maruti Suzuki, Tata Motors, Honda, Mahindra & Mahindra and Ashok Leyland. It was one of the first companies to supply outdoor skin panels for automobiles in the late 1990s, when it was largely imported. In the consumer durables space, its customers include LG, Samsung, Videocon and Haier.