Arcellor Mittal and SAIL in possible joint bid
LN Mittal’s ArcelorMittal and state-owned Steel Authority of India (SAIL) are exploring a joint bid for Bhushan Steel, the distressed company referred to the National Company Law Tribunal, Moneycontrol has learnt from two independent industry sources.
Both ArcelorMittal and SAIL had separately submitted their expressions of interest for the Bhushan asset. While the LN Mittal-headed company had shown its interest in October last year, SAIL was a last entrant in the race, throwing its hat in the ring only in December.
While the new development has created a buzz in the industry, sources in banking circles admitted that there is a strong possibility of the two steel majors joining hands. “ArcelorMittal has shown interest in buying and the government-owned SAIL needs money to buy. A joint bid makes sense,” a senior banker told Moneycontrol.
Though SAIL might not be in pink of health, its legacy in India makes it well placed when it comes to handling domestic operations. A partnership with SAIL would also be backed by the government. “With SAIL’s backing, ArcelorMittal will find it comfortable and easier to deal with the bidding process and, possibly clinching the deal. One has the government tag and the other has global expertise,” said an industry person aware of the development. Despite trying for more than a decade, ArcelorMittal’s presence in India is only through its stake in Uttam Galva Steels, which is now in the process of being referred to the NCLT.
ArcelorMittal, the world’s largest steelmaker, brings with it financial prowess and years of experience in making acquisitions work. The company, which produced 90 million tons of steel last year, had a turnover of $56.8 billion in 2016, with a net income of $1.8 billion.
Though the initial discussions between the two sides have been for Bhushan Steel, there is an option to extend the partnership to Bhushan Steel & Power and Essar Steel, both of which have also been referred to the NCLT.
“These are early days. It is to be seen what form the partnership takes,” said an industry executive.
A senior government official added that it was unlikely that SAIL – which is headed towards third consecutive year of losses – can bid alone for Bhushan Steel. “Just to pay the interest costs, the company needs a cash generation of Rs 5,000 crore,” the official said. SAIL reported a net loss of Rs 2,833 crore in FY17.