Published: Wed, May 16, 2018
Industry | By Terrell Bush

NCLT Clears Way For Tata Steel's Acquisition Of Bhushan Steel

NCLT Clears Way For Tata Steel's Acquisition Of Bhushan Steel

Bhushan Steel's committee of creditors (CoC) had approved Tata Steel's resolution plan, which includes an allotment of 12.27 per cent equity in the company to creditors. The tribunal also rejected Bhushan Energy's plea to continue its power purchase agreement with Bhushan Steel.

"The financial creditors shall receive a total consideration of Rs 35,200 crores for the settlement of the existing financial debt of BSL", Tata Steel said.

NCLT also dismissed the plea of engineering major L&T, an operational creditor of BSL, which had requested for a higher preference in recovery of debt on par with the financial creditors of the corporate debtor.

The transaction will be funded through a combination of equity subscription and inter-corporate loans, of which up to Rs 9,000 crore loans has an option of conversion into equity shares of BSL.

However, some employees of Bhushan Steel had challenged it before NCLT contending that Tata Steel was not eligible under section 29 (A) of the Insolvency and Bankruptcy Code (IBC).

Bhushan Steel was on the RBI's first list of 12 companies referred to the National Company Law Tribunal previous year.

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"Based on various acquisition scenarios, the flat steel market in India is expected to consolidate further from the current scenario (of 85% being controlled by six players) to anywhere between three to four players", ratings agency CRISIL said.

Tata Steel will be taking a 72.65% stake in Bhushan Steel, through its subsidiary Bamnipal Steel Ltd (BNPL).

Bhushan Steels and Electrosteel Steels were a part of Reserve Bank of India's "Dirty Dozen" list, which identified companies for immediate resolution.

Following NCLT approval the only other nod that is awaited is from the Competition Commission of India (CCI). This is reportedly Tata Steel's second-biggest acquisition after the Corus Group acquisition in 2007.

Tata Steel's domestic steel capacity, now at 13 million tonnes, is poised to be augmented by 5.6 million tonnes with the Bhushan Steel acquisition.

The aggregate fund received by Bhushan from Tata through a mix of preferential share and loan would be to the tune of Rs 35,132 crore which will be utilised to settle the existing debts of Bhushan, cost of insolvency process and outstanding employees dues.

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