Tata Steel may bid for Essar Steel’s Hazira plant

Mumbai: Tata Steel Ltd has expressed preliminary interest in acquiring debt-laden Essar Steel Ltd’s Hazira plant in Gujarat, according to two people aware of the talks between Tata Steel and Essar Steel executives.

While the bankruptcy resolution plan of Essar Steel has not yet been finalized, the interim resolution professional (IRP) for the steelmaker appointed by the National Company Law Tribunal (NCLT) has received initial interest from at least four potential buyers—two domestic and two foreign—the people cited above said on condition of anonymity. The IRP belongs to turnaround advisory firm Alvarez and Marsal.

Essar Steel Hazira is the country’s largest single-location flat steel plant. The complex also houses a 30 million tonne per annum (mtpa), all-weather, deep draft, dry bulk port and a 515MW natural gas-operated power plant.

Built at a total cost of more than Rs30,000 crore, Essar Steel Hazira has a steel-making capacity of 10 mtpa.

Emails sent to Tata Steel and Alvarez and Marsal remained unanswered till press time.

“The Hazira facility constitutes more than 80% of Essar Steel’s operations, while the rest of the facilities are largely for raw material processing, in which Tata Steel sees no value since it already has its own facilities,” one of the two people cited above said.

Apart from the Hazira plant, Essar Steel operates a downstream capability hub in Pune, beneficiation plants in Bailadila (Chhattisgarh) and Dabuna (Odisha) and pellet manufacturing plants in Visakhapatnam (Andhra Pradesh) and Paradip (Odisha).

Tata Steel has around 13 million tonnes of capacity at its two plants in Kalinganagar (Odisha) and Jamshedpur (Jharkhand) and hopes to doubleit over the next five years, Tata Sons Ltd chairman N. Chandrasekaran said in September.

In the same month, Tata Steel announced the merger of its European steel operations with German steelmaker Thyssenkrupp AG to create Europe’s second-biggest steel producer.

Mint reported in August that Tata Steel was considering buying stressed steel assets, including Essar Steel, which would give the firm a foothold in west India.

CNBC-TV18 reported in August that apart from Tata Steel, JSW Steel Ltd, ArcelorMittal, SSG International, Posco and Liberty House had informally expressed interest in acquiring a controlling stake in Essar Steel.

Business Standard reported in October that the interim resolution professional had asked potential suitors of Essar Steel to submit resolution plans for the company by 23 October. Essar Steel owed lenders around Rs45,000 crore, of which Rs31,671 crore had become non-performing as of 31 March 2016. The firm owes as much as 93% of this to a consortium of 22 creditors led by State Bank of India

In a September interview, Siddharth Shah, partner at corporate law advisory firm Khaitan and Co., said, “Steel appears to be the first one off the block which is showing promise for distressed investors and there are interesting assets within the current 12 cases which actually would attract some of the larger strategic or financial sponsors.”

Mint reported in August that Piramal Enterprises Ltd-Bain Capital Credit, AION Capital, Oaktree Capital, Lone Star Funds and SSG Capital had expressed interest in buying a controlling stake in Bhushan Steel Ltd.

On Monday, Tata Steel shares rose 0.83%, or Rs5.75, to Rs697.15 while the benchmark Sensex closed up 0.10%, or 32.67 points, at 31,846.89 points.

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