JSW weighs options to fund Bhushan, Essar deals

New Delhi: Sajjan Jindal-led JSW Steel is exploring various financing models, including a ‘joint control mechanism’, to fund the acquisition of the stressed assets of Bhushan Power and Steel and Essar Steel, a source said. This assumes significance as JSW Steel’s Rs 19,700 crore offer for debt-laden Bhushan Power and Steel (BPSL) has been backed by around 90 per cent of lenders. “JSW Steel is exploring differentiated financing options, including joint control model, to fund its acquisition of stressed assets of Bhushan Power and Steel and Essar Steel,” a source said.

Under the joint control model, a special purpose vehicle (SPV) will be set up and the acquired stressed assets will rest with the SPV. Joint control model will insulate debt impact of yet to be acquired stressed assets of these two firms on JSW Steel financials, the source said. If acquired, JSW Steel is exploring to merge the stressed assets of the both companies into its books post turnaround of the stressed assets, the source said.

When contacted, JSW Steel spokesperson declined to comment. Bhushan Steel and Power is among the 12 non-performing accounts referred by the RBI for NCLT proceedings and owes about Rs 45,000 crore to its lenders. According to reports, JSW Steel had submitted a resolution plan of Rs 19,700-crore to the CoCs of Bhushan Steel and Power.

JSW Steel had teamed up with NuMetal Mauritius to place a Rs 37,000 crore offer for Essar Steel in the second round of bidding.  It had earlier said it was seeking a legal opinion if it can bid solo for stressed assets of Essar Steel if fresh bids were allowed. JSW Steel has also implemented joint control model to bid for acquiring Monnet Ispat and Energy.

Jsw Steel grew from 1.6 million tonnes per annum (MTPA) in 2002 to 18 MTPA in 2018 both organically and inorganically. Despite the company’s eleven times growth in capacity, the JSW Steel’s financials improved substantially, according to sources. Market capitalisation of JSW Steel surged 300 times from Rs 258 crore in FY2002 to Rs 23,117 crore in FY2010 to Rs 87,503 crore currently.

Over last couple of years JSW Steel debt to Ebitda ratio has improved significantly. ‘It was 3.14 times in FY’17, then it improved to 2.57 times in FY’18 and in first quarter of FY’19 it improved to 2.26 times.

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