Steel companies listed for insolvency turn attractive buys

Indian steel industry, which is going through a painful consolidation, has a lot to cheer about this Diwali season. Both domestic and international steelmakers want to expand in India to cater to the upcoming demand for steel arising from various infrastructure projects. 

The positive sentiment in the steel industry is reflected in the number of bids received by debt-laden steel companies which are facing insolvency proceeding at the NCLT. 

Five steel companies are among the dirty dozen referred to the National Company Law Tribunal (NCLT) by the RBI, which is also an indicator of the distress faced by the steel sector. Bhushan Steel, and Bhushan Power and Steel, Electrosteel Steels, Essar Steel and Monnet Ispat and Energy are the companies for which the tribunal is seeking buyers. 

Domestic steel companies like Tata Steel, who are looking for inorganic growth, are willing to acquire these already established assets, so are international players like ArcelorMittal. The Lakshmi Mittal-led company has submitted expressed interest (EOI) in the assets of Bhushan Steel, which owes nearly Rs 42,000 crore to banks. 

In the case of Bhushan Steel, promoters' participation is also seen in the insolvency proceeding, JSW Steel wants to hold assets in their own company. JSW has also filed EOI for assets of Monnet Ispat. Same is the case with Essar Steel, where the companies promoters, Ruias don't want to forgo their holdings. Tata Steel is also in the fray to acquire assets of Essar Steel, suggest recent news reports. Essar Steel owes ₹37,284 crore to banks. 

Private equity firms are also looking at this distressed sale opportunity. Electrosteel Steels, which owes Rs. 10,274 crore to the banks, has received EOI from private equity firm, BanyanTree Finance. Srei Infrastructure Finance, which has lent around Rs. 300 to the Electrosteel has also filed EOI for a stake. 

State Bank of India is the banker which is leading the consortium of lender in most these insolvency proceedings. Earlier, at a national steel summit, former SBI chief, Arundhati Bhattacharya had called for more capital allocation from steel promoters to improve margins and scalability. And this move by steel players to consolidate locally would help them achieve both.