Tatas trump JSW with Rs35,200 cash offer for Bhushan Steel’s NPA

Tata Steel has emerged the front-runner in the bidding war for Bhushan Steel's 5 million tonne plant and related assets with an aggressive upfront cash offer of Rs35,200 crore and 12 per cent equity for creditors.

Reports quoting banking sources said Tata Steel's quote for Bhushan Steel's non-performing assets translated into a 27-per cent haircut for lenders, which trumped the offer of JSW Steel and Power in what is seen as the largest NPA sale in India.

JSW Steel has made a Rs29,700 crore cash offer for Bhushan Steel, which has a debt of Rs50,000 crore and owes lender banks around Rs44,000 crore in overdue loans.

Besides Tata Steel and JSW, employees of Bhushan Steel have reportedly put up a bid offering to pay Rs50 crore cash upfront and another Rs28,600 crore over 13 years while offering 98 per cent equity to the lenders.

The Tata offer came as a respite for loss-hit banks as the new offer of cash payment reduced the need for any substantial haircuts in the bankruptcy proceedings at the National Company Law Tribunal (NCLT).

Arpwood Capital acted as the adviser to Tata Steel for this transaction.

Both Tata Steel and JSW have attached conditions to their offers. JSW wants all existing contracts to be nullified. Sources cited the example of Bhushan Steel drawing power from a captive group company at an inflated price.

The two leading bidders have also sought exemption from open-offer requirements as stipulated in the takeover rules. Both said their offers are subject to approval by the competition watchdog and if they are forced to divest or hive off any assets, the valuation will get lowered accordingly.

While bankers said they will negotiate with the highest bidder for all cases referred to the bankruptcy court, the resolution professional will now enter into a final round of negotiations with the top bidders to sort out any last-minute clarifications before reverting to the committee of creditors with a final decision.

Among Bhushan Steel's lenders, State Bank of India has the highest exposure of over Rs12,000 crore. The proposal for payment involves upfront cash payment. But in all likelihood, Tata Steel will get the loan refinanced from large lenders, they said. The promoters own 57.82 per cent of the company. Of this holding, 71 per cent is pledged with banks and other financial institutions. The current market cap of Bhushan Steel is about Rs1,017.03 crore.