Tata Steel

Acquiring
Bhushan Steel
Steel Industry
● India is the world’s second-largest crude steel producer.
● The steel industry is known for being cyclical and reflective of overall market
conditions—demand increases during economic booms and plummets
during global recessions.
● Challenges:
● The Indian Steel Industry continues to grapple with uncertainties pertaining
to the availability and consistent supplies of raw materials.
● China—The top reason for the economic disruption of steel manufacturing
countries
● Depletion of high grade raw materials
Tata Steel- Bhushan Steel
● Tata Steel subsidiary, Bamnipal Steel Ltd. (BNPL) acquired 72.65% stake in
Bhushan Steel Ltd. (BSL), in accordance with the approved Resolution Plan
under the Corporate Insolvency Resolution Process (CIRP) of the Insolvency
and Bankruptcy Code 2016 (IBC).
● Tata Steel acquired 79 crore share at Rs 2 each.
● Settlement of Rs 35,200 crores towards financial creditors of BSL is being
carried out as per the terms of resolution plans.
● Additional Rs 1,200 crore will be paid to the operational creditors of BSL over
the course of 12 months as per their admitted claims and as per the terms of
the approved Resolution Plan.
 Deal Structure
The board of Bhushan Steel has inducted three
senior executives of Tatas.

The existing directors, including promoters Brij

Bhushan Singhal and Neeraj Singhal, will have to
resign with the change in ownership.

The three Tata nominees are Dibyendu Dutta,

group head-M&A and treasury at Tata Steel; Anand
Sen, president TQM (total quality management)
and steel business at Tata Steel; and Rajeev
Singhal, who is a director at several Tata Group
companies.

While Tata Steel ..

Read more at:

//economictimes.indiatimes.com/articleshow/64224
367.cms?utm_source=contentofinterest&utm_medi
um=text&utm_campaign=cppst
Reasons behind the acquisition
● Tata Steel’s immediate focus area is to stabilize operations and realize the
full potential of the company
● The aspiration is to reach an EBITDA margin of 25% on purchased raw
material basis and be the benchmark
● Tata Steel’s plan is to eventually converge the EBITDA per tonne metric of
Bhushan Steel with its own plant in Kalinganagar
● Tata Steel has several captive iron ore mines in and around Jamshedpur
and Kalinganagar, and with a small amount of capital expenditure, which can
also be made available to the Bhushan Steel plant to ramp up capacity
Broad Strategy of Tata Steel and
Bhushan Steel
● Tata Steel’s interest in Bhushan Steel was high as the latter had state of the
art plants at a cheap price while banks take a haircut on debt.
● Bhushan Steel has a 5.50 million tonne plant with operating profitability close
to 20% as of FY-17.
● Bhushan Steel is a long-term supplier to major renowned white goods
manufacturers & automobiles manufacturers.
● Bhushan Steel also has a significant stake in Odisha sponge iron & steel,
which also has high-grade iron ore mines, reserves of mines are 122 million
tonnes and it has a life of around 15 years.
 Strategy Contd...
● FY-17: Bhushan steel’s EBITDA is Rs. 29,931.88 Million with EBITDA margin of 19.91%
● Bhushan steel was running at very low capacity utilization when compared with JSW Steel.
● Bhushan Steel contributed nearly ₹2,100 crore to Tata Steel’s topline, and ₹66 crore to the parent
company’s operating profits.
● Bhushan steel has a debt of around Rs. 462 billion. If banks are ready to take a haircut of around Rs.
130 billion, then it’s a complete win-win situation for the prospective buyer as they will get a fully
operational plant at a reasonable price.
● Tata Steel’s debt has risen by about ₹16,500 crore on account of the acquisition.
● Cash and cash-equivalents has declined to ₹13,086 crore by the end of the first quarter from ₹22,932
crore at the end of the previous quarter.
 Stock Market Reaction
Tata Steel Ltd. Tata Steel BSL Ltd.
 After Acquiring BSL
India steel production grew by 34% y-o-y to 4.38
million tonnes with the acquisition and ramp-up of
Tata Steel BSL.
India deliveries stood at 3.89 million tonne and now
account for more than 55% of consolidated volumes.
Also, the company increased its market share in
automotive, industrial products and projects,
branded products, retail and solutions segment.
Steel Industry
● India is the world’s second-largest crude steel producer.
● The steel industry is known for being cyclical and reflective of overall market
conditions—demand increases during economic booms and plummets
during global recessions.
● Challenges:
● The Indian Steel Industry continues to grapple with uncertainties pertaining
to the availability and consistent supplies of raw materials.
● China—The top reason for the economic disruption of steel manufacturing
countries
● Depletion of high grade raw materials
Tata Steel- Bhushan Steel
● Tata Steel subsidiary, Bamnipal Steel Ltd. (BNPL) acquired 72.65% stake in
Bhushan Steel Ltd. (BSL), in accordance with the approved Resolution Plan
under the Corporate Insolvency Resolution Process (CIRP) of the Insolvency
and Bankruptcy Code 2016 (IBC).
● Tata Steel acquired 79 crore share at Rs 2 each.
● Settlement of Rs 35,200 crores towards financial creditors of BSL is being
carried out as per the terms of resolution plans.
● Additional Rs 1,200 crore will be paid to the operational creditors of BSL over
the course of 12 months as per their admitted claims and as per the terms of
the approved Resolution Plan.
 Deal Structure
The board of Bhushan Steel has inducted three
senior executives of Tatas.

The existing directors, including promoters Brij

Bhushan Singhal and Neeraj Singhal, will have to
resign with the change in ownership.

The three Tata nominees are Dibyendu Dutta,

group head-M&A and treasury at Tata Steel; Anand
Sen, president TQM (total quality management)
and steel business at Tata Steel; and Rajeev
Singhal, who is a director at several Tata Group
companies.

While Tata Steel ..

Read more at:

//economictimes.indiatimes.com/articleshow/64224
367.cms?utm_source=contentofinterest&utm_medi
um=text&utm_campaign=cppst
Reasons behind the acquisition
● Tata Steel’s immediate focus area is to stabilize operations and realize the
full potential of the company
● The aspiration is to reach an EBITDA margin of 25% on purchased raw
material basis and be the benchmark
● Tata Steel’s plan is to eventually converge the EBITDA per tonne metric of
Bhushan Steel with its own plant in Kalinganagar
● Tata Steel has several captive iron ore mines in and around Jamshedpur
and Kalinganagar, and with a small amount of capital expenditure, which can
also be made available to the Bhushan Steel plant to ramp up capacity
Broad Strategy of Tata Steel and
Bhushan Steel
● Tata Steel’s interest in Bhushan Steel was high as the latter had state of the
art plants at a cheap price while banks take a haircut on debt.
● Bhushan Steel has a 5.50 million tonne plant with operating profitability close
to 20% as of FY-17.
● Bhushan Steel is a long-term supplier to major renowned white goods
manufacturers & automobiles manufacturers.
● Bhushan Steel also has a significant stake in Odisha sponge iron & steel,
which also has high-grade iron ore mines, reserves of mines are 122 million
tonnes and it has a life of around 15 years.
 Strategy Contd...
● FY-17: Bhushan steel’s EBITDA is Rs. 29,931.88 Million with EBITDA margin of 19.91%
● Bhushan steel was running at very low capacity utilization when compared with JSW Steel.
● Bhushan Steel contributed nearly ₹2,100 crore to Tata Steel’s topline, and ₹66 crore to the parent
company’s operating profits.
● Bhushan steel has a debt of around Rs. 462 billion. If banks are ready to take a haircut of around Rs.
130 billion, then it’s a complete win-win situation for the prospective buyer as they will get a fully
operational plant at a reasonable price.
● Tata Steel’s debt has risen by about ₹16,500 crore on account of the acquisition.
● Cash and cash-equivalents has declined to ₹13,086 crore by the end of the first quarter from ₹22,932
crore at the end of the previous quarter.
 Stock Market Reaction
Tata Steel Ltd. Tata Steel BSL Ltd.
 After Acquiring BSL
India steel production grew by 34% y-o-y to 4.38
million tonnes with the acquisition and ramp-up of
Tata Steel BSL.
India deliveries stood at 3.89 million tonne and now
account for more than 55% of consolidated volumes.
Also, the company increased its market share in
automotive, industrial products and projects,
branded products, retail and solutions segment.