NEW DELHI : India’s second-largest private steelmaker, JSW Steel Ltd, may go slow on buying bankrupt Bhushan Power and Steel Ltd, despite the cabinet on Tuesday approving an ordinance to ring fence successful bidders from criminal proceedings for offences committed by previous promoters, three people with knowledge of the matter said, requesting anonymity.
The cabinet’s approval did not give too many details and, as such, JSW steel will wait for further clarifications from the National Company Law Appellate Tribunal (NCLAT) when the matter comes up for hearing on 13 January. The ordinance says that ongoing investigations against original promoters will continue and the new owner must attend all proceedings.
“The fine print is not clear on this ordinance yet. JSW will move ahead only when everything is crystal clear because the stakes involved are too high,” said one of the persons mentioned above.
A JSW Steel spokesman chose not to comment on the matter.
JSW Steel had approached NCLAT for protection from any liabilities or litigation that may arise as the former promoters of Bhushan Power and Steel Ltd were accused by banks of a fraud. Without such an assurance, JSW could have been dragged into litigation, which the company was unwilling to take upon itself.
The company had told the tribunal that in the absence of protection from possible attachment of assets and liabilities that may arise from criminal proceedings, it would not be able to implement the resolution plan for BPSL.
NCLAT, which had approved JSW Steel’s ₹19,700-crore bid to take over BPSL, had subsequently stayed the transaction pending an investigation into fraud and money laundering by the former owners of the debt-ridden company. Bhushan Steel had accumulated a debt of ₹47,000 crore and was part of the original dozen cases identified by the Reserve Bank of India to be referred to bankruptcy courts.
In July-August, JSW Steel had raised around ₹15,000 crore in bank loans in anticipation of the buyout, when the NCLAT put a stay on the transaction. The steelmaker is having to service the loan. Now, it plans to raise a fresh loan of ₹3,000 crore in January from banks to complete the transaction, an executive of a leading bank said.
JSW is likely to complete the purchase of Bhushan Steel and Power by March-end, said another of the persons mentioned above.
Meanwhile, the company hopes there will be a further recovery in steel prices, which would make conditions viable for production. Steel prices had dropped by around 20% between January and September to ₹32,500 per tonne for the benchmark hot rolled coil products. However, since then, steelmakers have gradually raised their prices by ₹1,000 per tonne with no adverse impact on demand. All the companies are expected to raise prices by another ₹700-1,000 in January.
Internationally Steel prices have been going up whereas raw material prices are stable, which is improving profitability.
“It appears that construction demand is picking up and things are brightening up for the steel industry. All that bodes well for the proposed buyout of Bhushan Steel,” said the third person.