IBC Success Stories
IBC’s Success - Steel Industry
Aggressive expansion plans that forced steel companies to accumulate large piles of debt between 2005 and 2010 spelt doom for many players. Unfavourable demand conditions and high interest costs weighed on many companies, pushing them to declare insolvency under the Insolvency and Bankruptcy Code (IBC). For some of the larger players, however, assets priced attractively under the IBC offered a good opportunity to expand and strengthen their capacities in the long run. Five steel majors — Bhushan Steel, Bhushan Power and Steel, Essar Steel, Electrosteel Steels and Monnet Ispat & Energy — that came for resolution under the IBC constitute more than a sixth (22 million tonnes) of the total crude steel capacity in India… Read More
Tata Steel-Bhushan Steel
Tata Steel’s ₹35,132-crore resolution plan to take over Bhushan Steel’s assets emerged as a flagship case for the IBC resolution process. The resolution was carried out through Tata Steel’s wholly-owned subsidiary, Bamnipal Steel. This enabled Tata Steel to acquire a 72.65 per cent stake in Bhushan Steel. Before this, Bhushan Steel was operating at a capacity of nearly 3.5 million tonnes per annum (mtpa) and had an installed capacity of about 5.5 mtpa. Though the company was reporting net losses due to a high interest burden, it was profitable at the operating level — an operating profit of about ₹4,000 per tonne of output recorded in FY18. Bhushan Steel, a predominantly flat steel producer, was expected to consolidate Tata Steel’s position as one of the top flat steel makers…Read More
JSW Steel-Monnet Ispat
The resolution plan of JSW Steel to acquire Monnet Ispat is different. The former joined hands with a private equity firm, AION Capital, and infused ₹2,875 crore in the latter. This gave JSW Steel a shareholding of 23.1 per cent, which was treated as an investment in a joint venture. This enabled the incomes earned or losses incurred from the joint venture to be adjusted in the value of investment. Therefore, Monnet Ispat’s incomes and assets have not been consolidated in JSW Steel’s financial statements. Before acquisition, Monnet Ispat’s performance was dismal. In 2011, it increased its debt to fund capacity expansion. The company’s debt stood at ₹12,262 crore towards the end of FY17. It has consistently been recording losses since FY15, eroding its net worth in the process…Read More
