With its latest move to acquire Bhushan Power & Steel Ltd (BPSL), the Sajjan Jindal-led JSW Steel may end fiscal year 2021 as the largest steelmaker in India.
The acquisition is also a fresh assault on Tata Steel's numero uno position. The two steelmakers have been involved in an intense race over the last few years, with both aggressively bidding for bankrupt firms that landed up in insolvency courts.
Last week, BPSL’s lenders voted to accept JSW Steel's offer to deposit Rs 19,350 crore in an escrow account and complete the acquisition by the end of March. 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 have now agreed to the condition.
For JSW Steel, the timing of the acquisition could not be better as commodity prices continue to their upward trek, not to speak of the opportunity to go one up against Tata Steel. But, as industry observers point out, apart from the BPSL acquisition, JSW Steel’s own organic expansion will add to its numbers.
How the numbers stack up
One thing is clear. Tata Steel is by far the biggest Indian steelmaker, with a global capacity of 33 million tonnes a year. About 13 million tonnes of that come from its overseas operations, mostly in Europe. The rest, about 20 million tonnes of capacity in India, is just enough to make it the biggest steel producer in the country.
In the second place is not JSW Steel but state-owned SAIL, with a capacity of 19.63 million tonnes a year. JSW Steel is third, with an annual steel-making capacity of 18 million tonnes.
But that will change, possibly in the remaining days of the current fiscal year, and majorly in the next. “While the BPSL acquisition will add 3 million tonnes of capacity, JSW Steel has other organic expansions that will bring in more numbers,” said a senior executive from the industry.
A majority of that expansion will be at its Dolvi, Maharashtra-based unit, which is doubling capacity to 10 million tonnes. There is also the one million tonnes that will come from Monnet Ispat, another insolvent company that was picked by JSW Steel.
In total, JSW Steel will have a capacity of 27 million tonnes a year in the 2022 financial year.
Now, here is the interesting part; both, Tata Steel and JSW Steel, have ambitious expansion plans. While Tata Steel wants to double its production capacity to 40 million tonnes, JSW Steel has an eye on the 50 million tonne-mark.
If one goes by the number of steel companies that are on the block, the fierce rivals will be sure to continue their acquisition sprees as well.
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