NCLT clears decks for Tatas' acquisition of Bhushan Steel

NCLT clears decks for Tatas' acquisition of Bhushan Steel

The company, which was admitted for insolvency proceedings last February, had defaulted on its ₹56,000-crore loan.

The Committee of Creditors (CoC) for Bhushan Steel had approved Tata Steel's Rs32,500 crore offer along with 12.27 per cent equity.

In a regulatory filing, Bhushan Steel said that the funds received from the investment will be to the tune of 35,132.58 crores and will be used to settle the existing debts of the company.

Tata will invest in Bhushan, where the lenders will also get a 12.27 per cent stake, through its wholly owned subsidiary Bamnipal Steel Ltd. It will be funded through a combination of equity and inter-corporate loans, of which upto Rs 9,000 crore loans have an option of conversion into equity shares of BSL. Lenders would be allotted equity shares by converting loan amount of Rs14.5cr at a face value of Rs2. Additionally, Tata will pay another Rs 1,200 crore to the operational creditors.

L&T, which is an operational creditor of Bhushan Steel, had sought higher priority in recovery of debt in the resolution process at par with the financial creditors.

The tribunal also dismissed a plea filed by the employees of Bhushan Steel opposing Tata Steel's bid and imposed a fine of Rs 1 lakh. The NCLT nod will be a shot in the arm for Tata Steel which has been allegedly facing challenges on the ground in its efforts to assert control over BSL's main plant at Dhenkanal in Odisha. Perhaps, this step will help reduce litigation drama for bankruptcy cases going forward.

The tribunal also rejected Bhushan Energy's plea to continue its power purchase agreement with Bhushan Steel.

With the deal now approved by NCLT, Tata Steel will add 5.6 million tonnes per annum to its existing capacity of 13 mtpa and emerge as the largest steel producer in the country, ahead of JSW Steel. With Tata Steel tipped to enter into a joint venture with ThyssenKrupp of Germany for its European steel business, the focus is clearly back on growth in India.

Tata Steel is also due to announce its Q4 FY18 results today, which according to a Reuters poll will mark the company's return to green.

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