JSW Steel has closed the acquisition of Bhushan Power & Steel Ltd, in a move that makes it the largest steelmaker in the country.
The Sajjan Jindal-led company has paid Rs 19,350 crore to the financial creditors of BPSL, it said on March 26.
"This is an important milestone as it is the largest acquisition in the history of JSW Steel," Chairman Sajjan Jindal told employees in a letter soon after the deal was officially announced. "This acquisition not only aligns with our core business and purpose but also establishes our presence accelerates our growth vision in eastern India," he added.
The company in its announcement also shared the deal structure that looks complicated. But it was necessitated, Jt MD and Group CFO Seshagiri Rao told Moneycontrol, as the lenders committed insisted that the company couldn't bring in any other investor as it had submitted the Expression of Interest alone.
JSW Steel said a sum of Rs 8,614 crore "has been arranged" in Piombino Steel Ltd (PSL), a unit of JSW Steel, through a mix of equity, and optionally convertible instruments, issued to the company and JSW Shipping & Logistics Private Ltd, and debt.
PSL's funds include a total infusion of Rs 5,087 crore by JSW Steel in the form of equity and optionally convertible instruments.
"Of the PSL funds, an amount of Rs 8,550 crore were invested in Makler Private Ltd, a SPV, through equity and convertible instruments. The SPV also availed short term loans," JSW Steel said.
The SPV, the company said, has been merged with BPSL, and PSL holds 100 percent equity shares in the acquired company.
The target company
BPSL has an annual capacity of about 2.5 million tons in Jharsguda, taking JSW Steel past Tata Steel's India capacity of 19.63 million tons a year. JSW Steel's capacity now stands at 20.5 million tons a year.
BPSL had a turnover of Rs 8,635 crore as on March 31, 2020.
"The acquisition is part of inorganic growth strategy of the company. Through this acquisition the company will establish its presence especially in flat steel business in the eastern region in India," JSW Steel said in its statement.
BPSL was admitted in insolvency courts in July 2017. JSW Steel had emerged victorious after a bidding race with Tata Steel, in September 2019, when the NCLT approved its resolution plan.
The deal though still has one more hurdle to cross.
Though JSW Steel had received the National Company Law Tribunal’s green light for the BPSL takeover in 2019, an investigation by the Enforcement Directorate had delayed the eventual handover.
The ED is investigating money laundering charges against BPSL's former promoters, and in the process attached company assets worth over Rs 4,000 crore. JSW Steel has sought immunity from the probe. Also, it has said that if the Supreme Court votes against its ongoing petition for immunity, the lenders will have to return the Rs 19,350 crore. The banks had agreed to the condition.The matter is now with the Supreme Court.