JSW Steel looks for partner to bid for Bhushan Power

JSW Steel is likely to rope in a partner to bid for the stressed assets it is eyeing — Bhushan Power & Steel, people aware of the development said. This will help the company insulate itself from the short-term risks involved in turning around the bankrupt steelmakers. JSW Steel prides itself on its financial ratios and to protect those had refrained from going overboard for assets like Bhushan Steeland Usha Martin in the past. It had employed a ‘joint control model’ to acquire Monnet Ispat& Energy and may look at the same for Bhushan Power & Steel and Essar Steel as well. This model entails the creation of a special purpose vehicle (SPV) to take over the asset. Once the acquired business turned around, it would be merged with JSW Steel. “This protects the company’s books from the debt impact of the acquisition till the time the asset starts making money at which time it can be merged with the company,” one of the people said. For acquiring Monnet Ispatunderthe insolvency code, JSW Steel had bid with Aion Investments. It had put in Rs 375 crore as equity and quasi-equity instruments and raised Rs 1,000 crore through debt that would be serviced from Monnet Ispat’s cash flow without any recourse to JSW Steel. According to reports, JSW Steel has offered Rs 19,700 crore for Bhushan Power & Steel. On Tuesday, 90% of Bhushan Power & Steel’s lenders voted for JSW Steel's plan. The company is competing with Tata Steel and UK’s Liberty House for Bhushan Power & Steel that owes Rs 47,000 crore to lenders. The next hearing in the case is scheduled for Monday. “We don't rule out a structure where the company gets a partner to bid for the assets since the management has been very categorical in saying that its net debt to EBITDA shall not exceed 3.75x post acquiring assets,” said Ritesh Shah, lead analyst for materials at Investec Capital Services. Its net debt to EBITDA ratio was 2.26 at the end of the June quarter. It had consolidated net debt of Rs 38,019 crore as of March 2018. For its offer for Essar Steel, the company is also considering bidding alone after it had initially tied up with Numetal to bid, said a person.