JSW Steel plans Monnet-like structure for proposed BPSL acquisition

Sajjan Jindal-controlled JSW Steel is mulling a Monnet-like structure for the proposed acquisition of Bhushan Power and Steel to avoid having debt in its books.

Sources said that while a group company would have a majority holding in a special purpose vehicle (SPV) for the acquisition, JSW Steel would have a minority holding. In the case of Monnet Ispat & Energy, Aion is the majority partner, while JSW Steel has a minority holding.

When contacted, a JSW spokesperson declined to comment on the matter.

The Monnet acquisition happened in August 2018 when the sector was still at a high. The sector and the economy are witnessing a slowdown since September-October of last year. Although steel prices had dipped to a low of Rs 32,250 (hot rolled coil), prices have been on the rebound since November on the back of a demand recovery from the construction sector and infrastructure push by the government.

Industry analysts said that in order to avoid having the debt on JSW Steel's books, it would have to have a holding of less than 50 per cent in the SPV. However, it is not clear whether it would be possible to have the SPV structure in place

the time of acquisition since the resolution applicant was JSW Steel, or whether it would be take effect at a later date.

The net debt of JSW at the end of December quarter was at Rs 49,552 crore. On Thursday, rating agency ICRA downgraded JSW Steel's long-term rating to "AA-" from "AA". However, the company's short-term rating has been reaffirmed.

ICRA has factored in an expected increase in JSW Steel's leverage in the near-to-medium term owing to the proposed acquisition of BPSL. While arriving at the ratings, ICRA considered the consolidated financial risk profile of JSW Steel including that of the acquisition vehicle for BSPL, the rating agency said.

The proposed acquisition is largely debt funded, which along with the absence of fresh equity raising by JSW Steel, is expected to adversely impact the company's consolidated financial risk profile, ICRA noted. "JSW Steel along with other partners (consortium) on joint and several basis will also act as put option providers for NCDs of Rs 3,000 crore, to part-fund the acquisition of BPSL," it added.

ICRA has also noted JSW Steel's large ongoing capital expenditure (capex) programme towards upstream and downstream capacity expansions which would keep its free cash flows under check and keep the overall debt levels elevated in the near and medium term.

The National Company Law Appellate Tribunal (NCLAT) approved the resolution plan of JSW Steel to acquire BPSL on February 17, 2020. However, the company's former chairman and managing director Sanjay Singal has challenged JSW's resolution plan in the Supreme Court, which agreed to hear the matter. However, there is no stay on payment and JSW's 30-day timeline ends on March 16.

Banks are hoping that the recovery from Bhushan Power, which owes financial creditors around Rs 47,000 crore, would be completed in March.

JSW Steel says Fitch revises outlook on company to negative from stable

JSW Steel on Wednesday said Fitch has revised the outlook on the company to 'negative' from 'stable'.

"Fitch has affirmed Long-Term Issuer Default (IDR) Rating to 'BB'. The outlook on the IDR has been revised to negative from stable," the steel major said in a filing to the BSE.

The revision of the outlook reflects the risks in the company's ability to deleverage and generate positive free cash flow because of the various challenges in the Indian market, JSW Steel said.

The agency has also affirmed JSW's senior unsecured rating and the rating on its senior unsecured notes at 'BB', the filing said.

JSW Steel stock was trading at Rs 261.15, down 0.59 per cent, on the BSE.

JSW Steel's $2.7-billion buy of Bhushan Power & Steel faces legal test

JSW Steel $2.7-billion purchase of a bankrupt steel mill is facing a fresh hurdle after a former chairman of Bhushan Power & Steel challenged the deal in the country’s top court.

Sanjay Singal filed a petition on Monday against a ruling by a bankruptcy tribunal that had approved the deal earlier this month, according to the Supreme Court’s website. The petition hasn’t yet been allotted a date for a hearing. A JSW spokesman declined to comment.

Bidders for bankrupt steel mills have faced repeated delays in buying indebted assets. The Sajjan Jindal-led mill has been caught in legal tangles since its Rs 19,700 crore ($2.7 billion) bid for Bhushan Power was first approved last year, while ArcelorMittal faced a year-long battle for its takeover of Essar Steel India.

Singal’s plea threatens to delay or derail the takeover. An adverse ruling could also be a setback for lenders, which led by PNB, are seeking a speedy resolution.

JSW Steel declared preferred bidder for Jajang iron ore block in Odisha

JSW Steel on Monday said it has been declared as a preferred bidder for Jajang iron ore block in Odisha.

The Sajjan Jindal-led firm has bagged the iron ore mine in the auction of blocks in Odisha. The block holds estimated reserves of 39 million tonne.

"The company (JSW Steel) has been declared as a preferred bidder vide communication dated February 22, 2020 received from the Director of Mines, Odisha for an iron ore mine (Jajang iron ore block) in the auctions held by the government of Odisha on February 6, 2020," JSW Steel said in a BSE filing.

The projected iron ore resource as on March 31, 2020 in this mine as per tender documents is around 39.40 million tonne, it said.

"The highest final offer price by the company to become a preferred bidder is 110 per cent of average monthly prices of iron ore of different grades and quality published by Indian Bureau of Mines (IBM) in Odisha from time to time," JSW Steel said.

The company will take all requisite steps as per the tender document to obtain the letter of intent.

It will also take statutory clearances, execute a Mine Development and Production Agreement (MDPA) and start the mining operations.

JSW Steel gets NCLAT's approval to acquire Bhushan Power for Rs 19,700 cr

The National Company Law Appellate Tribunal on Monday allowed JSW Steel to acquire of Bhushan Power & Steel Ltd for Rs 19,700 crore by providing it immunity from prosecution.

A two-member bench headed by Chairman Justice S J Mukhopadhaya, said that JSW Stwel will be immuned from the acts done by the former promoters of the Bhushan Power & Steel Ltd.

However, it also said that prosecution against the former promoters under the money laundering act by the Enforcement Directorate can continue.

It has also rejected the petitions filed by operational creditors, seeking higher claims.

The bench said that the EDITDA earned by BPSL during its Corporate Insolvency resolution period will be given to JSW Steel.

As steel demand picks up, companies turn to home market; prices may go up

A pick-up in demand for steel and successive price increases is prompting companies to bring back focus on the domestic market.

Steel companies are mulling an increase in prices up to Rs 2,000 a tonne in February, which would be the fourth increase in a row. The price differential between domestic steel and imports is approximately $30 a tonne currently.

JSW Steel, director (commercial & marketing), Jayant Acharya said there is a potential for prices to increase to that extent.

Add to it, an increase in international prices by $50-$100 a tonne in the last few months and an upward push in raw material prices, and there is a case for an increase in steel prices.

After a slump in September-October, prices started moving up since November. International prices of hot rolled coil (HRC) in April (last year) were at around $530 a tonne. In September-October, it dropped to $430 a tonne and now it's around $505 a tonne.

"There is an improvement in demand. Prices have bottomed out," Acharya added.

It holds for domestic prices too that have been moving up since November. In the last three months, the increase passed on to customers is about Rs 3,000 a tonne.

Restocking is one of the major factors fuelling the increase. "Infrastructure and construction sector has seen some of the demand coming back as has auto," said an official of another major steel producer.

As a result, there has been some correction in inventories across supply chains. JSW's inventory over the last quarter, for instance, has reduced by 245,000 tonne. Over the next few months, Acharya expects demand to pick up further.

The improvement in demand is prompting steel companies to focus on the domestic market.

Acharya said, JSW's exports moderated from 31 per cent of total sales in the second quarter to 24 per cent in the third quarter. "Some moderation was expected in the fourth quarter as well," he said, while reminding that the fourth quarter was seasonally a strong quarter.

"The focus is clearly on the domestic market. Whenever there is an increase in prices, the focus is on the domestic market. Even if there is some differential in import and domestic prices, transportation time makes up for it. Exports to Europe take about 2-3 weeks," said another producer.

With the increase in prices, there is clear-cut case for companies to increase focus on the domestic market, said Jayanta Roy, senior vice president, ICRA.

To bring down the inventory levels, steel companies had resorted to increase exports in the second quarter. However, month-on-month, exports have been coming down.

"The key thing to watch out for would be whether the price increase planned in February would be sustainable," Roy added.

Currently, prices of HRC are at around Rs 36,000 a tonne, that's at the same level as August 2019.

The only difference between now and then, said Roy, is that coking coal prices were at around $200 a tonne last August and it's currently at $150 a tonne. "So there is a coal cost saving of $35-$40 a tonne," he added.

Coking coal prices had dipped further to $130 a tonne and then moved to $150-levels.

Q3 results: JSW Steel net profit tumbles 88% to Rs 187 cr from Rs 1,603 cr

JSW Steel on Friday posted an 88.33 per cent decline in its consolidated net profit to Rs 187 crore for the December 2019 quarter.

The company had posted a consolidated net profit of Rs 1,603 crore in the year-ago period, JSW Steel said in a filing to the BSE.

"The net profit after tax for the quarter was Rs 187 crore, after incorporating the financials of subsidiaries and joint ventures," the company said in a statement.

Its consolidated income during the October-December 2019 period was Rs 18,182 crore, registering a fall of 10.6 per cent over the year-ago period, the filing said.

The company's crude steel production during the October-December 2019 period stood at 4.02 million tonne (MT), up five per cent quarter-on-quarter.

"Production in the quarter was lower by five per cent y-o-y due to extended monsoon which impacted operations at both Dolvi and Vijayanagar," the statement said.

After a weak momentum during the first half of the year, the current quarter witnessed a turnaround in business sentiment and better liquidity conditions, driving an overall improvement in steel demand and pricing from November onwards, it said.

"A large part of this demand improvement is from infrastructure and construction sectors," the company said.

"Following a period of prolonged inventory adjustment (de-stocking) in the first half, the initial spurt in demand was driven by restocking in the supply chain. As a result, the company was able to liquidate a large part of the inventory that was accumulated in the first half, primarily by selling more in the domestic markets," it said.

On the outlook, the company said the domestic steel sector is expected to grow significantly on the back of various initiatives of the government pertaining to the domestic infrastructure and supportive monetary policies.

JSW Steel plans to raise up to Rs 1,000 crore through issuance of NCDs

JSW Steel on Thursday announced its plan to raise up to Rs 1,000 crore through issuance of non-convertible debentures.

The proceeds will be used to meet long-term working capital requirements, refinance existing debt, general corporate purpose and ongoing capital expenditure, the Sajjan Jindal-led company said in a filing to BSE.

"The committee of directors of the issuer (board)... approved the allotment of 10,000 rated, listed, secured, redeemable, nonconvertible debentures (NCDs) bearing a face value of Rs 10,00,000 each..., aggregating to Rs 1000,00,00,000," the company said.

The shares of JSW Steel were trading at Rs 265.50 a piece on BSE, down 0.11 per cent from the previous close.

JSW Steel eyes to supply 1.5 lakh tonne to metro rail projects in FY20

Steel major JSW Steel on Tuesday said it expects to raise its supply to metro rail projects to about 1,50,000 metric tonnes in the current financial year.

"In the current financial year, the company expects to increase its supplies to the metro rail projects to about 1,50,000 metric tonnes as compared to its supplies averaging 1,00,000 metric tonnes per year over last few years," the company said in a BSE filing.

The company is supplying to metro rail projects in Mumbai, Pune, Nagpur, Bangalore, Chennai, Kolkata, Indore, Bhopal, Lucknow and Ahmedabad.

"The ongoing supplies as well as those already completed during the current fiscal will boost JSW Steel's supplies to metro rail projects by more than Rs 600 crore following successful completion of these deliveries," it said.

In October and November, the steel major supplied more than 30,000 metric tonnes JSW Neosteel TMT bars towards construction of metro projects in various cities of the country.

The shares of JSW Steel were trading at Rs 261.10 apiece in the morning trade.

JSW's Bhushan Power acquisition in deep freeze as ED refuses to relent

JSW Steel, looking to acquire bankrupt Bhushan Power and Steel Ltd (BPSL), might have a longish wait.

The National Company Law Appellate Tribunal (NCLAT) had directed the government's Enforcement Directorate (ED) to revoke the properties the latter had attached of Bhushan. The ED had done so on the reasoning that these were proceeds from criminal acts.

The ED is learnt to have told the tribunal and the Union ministry of corporate affairs (MCA) that doing so will first require amending the Prevention of Money Laundering Act (PMLA).

“The probe agency, under Section 41 of PMLA, cannot revoke any action taken under the said law, unless the Supreme Court intervenes," said a senior ED official in the know.

Section 41 says: "No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Director, an adjudicating authority or the appellate tribunal is empowered by or under this Act to determine, and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act."

Last month, the ED had provisionally attached assets worth Rs 4,025 crore, including land and machinery, of the BPSL’s plant in Orissa, in connection with a money laundering case involving alleged diversion of 'bank loans.

The probe agency says insolvency proceedings come under civil law and that cannot override criminal law proceedings. An official also cited a Delhi court order which says the anti-money laundering law prevails over Insolvency and Bankruptcy Code (IBC) proceedings.

The tribunal has put on hold the Rs 19,700-crore payout offer of JSW Steel for acquiring the debt-ridden firm. However, it has said the ED actions would undermine the IBC.

Legal experts say the insolvency code needs clarity on this, as there is no definite law that a company and its promoters which are being charged for a criminal offence would be given any such exemption if it is undergoing insolvency proceedings.

In this case, BPSL allegedly misused bank loans for dubious transactions, later routing the money to promoter group entities. The ED alleges company promoter Sanjay Singhal did not use the money for the purpose it was sanctioned.

Sources say the MCA is contemplating a law change in the wake of this development.

While the NCLAT has accepted JSW Steel's debt resolution plan, it has refused to give immunity from any criminal proceedings against the ex-promoters and directors of BPSL, if such proceedings lead to recovery of money siphoned off as alleged.

NCLAT, however questioned the ED’s jurisdiction to seize the property of a corporate debtor, particularly when an appeal is pending with regard to attachment. Representatives of MCA had also said the ED lacked the authority to attach assets under the insolvency process.

JSW Steel files appeal against NCLT order on Bhushan Power resolution plan

JSW Steel has moved the National Company Law Appellate Tribunal (NCLAT) seeking immunity from criminal proceedings in the ongoing fraud investigation against Bhushan Power & Steel (BPSL).

JSW informed the stock exchanges on Friday, that it noticed certain modifications on detailed examination of the terms and conditions of the NCLT order approving the resolution plan.

"Further certain important reliefs sought by the company have also not been granted. The company has therefore appealed against the said order dated September 5, 2019 before the relevant judicial forum," the notice read.

Last week, the National Company Law Tribunal (NCLT) approved JSW's Rs 19,700 crore offer for BPSL, one of the 12 cases mandated by the Reserve Bank of India (RBI) for debt resolution under the Insolvency and Bankruptcy Code (IBC).

However, the tribunal disposed of various reliefs sought by JSW from the statutory authorities under the Income Tax Act, 1961, Ministry of Corporate Affairs (MCA), Department of Registration and Stamps, Reserve Bank of India, and others.

The reliefs and concessions sought by JSW were part of the CoC (committee of creditors) approved resolution plan.

The NCLT had disposed of the waiver and said, "We do not feel persuaded to accept the prayer made in the resolution plan. Yet the resolution plan applicant may file appropriate applications before the competent authorities which would be considered in accordance with law because it would not be competent for the adjudicating authority - NCLT to enter into such area for granting relaxation, concession or waiver which is wholly within the domain of competent authorities."

Vidisha Krishnan, Partner, M V Kini & Co, said if the concessions sought were part of the resolution plan and the approved plan does not cover the waiver, then the resolution applicant is within its right to file an appeal. JSW's appeal is likely to be taken up by NCLAT on Monday.

BPSL is facing an investigation from different government agencies. Based on an FIR by the CBI and a forensic audit report, several banks had reported fraud. The combined amount reported as fraud by just Punjab National Bank (PNB) and Allahabad Bank was more than Rs 5,500 crore.

The tribunal has, however, granted partial immunity and said that criminal proceedings initiated against erstwhile directors shall not affect JSW-the H1 resolution applicant or the implementation of the resolution plan by the monitoring agency.

The other point that JSW Steel is also appealing against is the directive that profits earned by running the corporate debtor during the corporate insolvency resolution process are to be redistributed in accordance with the Essar Steel judgment of July 4, 2019.

The Essar order had said that where the successful resolution applicant is not paying the total dues to creditors but pays lesser than the claim, the profit should be distributed among all creditors including financial and operational.

JSW however feels that the profits could be used as working capital.

With the appeal, a resolution in BPSL which has been dragging for more than two years is not looking likely in the immediate term.

Corporate debtor needs immunity from criminal liabilities: JSW Steel MD

The Insolvency and Bankruptcy Code (IBC) requires a clarification or amendment to give immunity to the corporate debtor from all civil and criminal liabilities, said JSW Steel Joint Managing Director and Group Chief Financial Officer Seshagiri Rao (pictured).

Rao said it in the context of the banking frauds that have surfaced in Bhushan Power & Steel (BPSL), currently going through the insolvency process. JSW Steel’s Rs 19,700 crore offer for the company had emerged as the successful bid though the resolution plan is yet to get the NCLT (National Company Law Tribunal) nod.

However, a number of banks had reported fraud by BPSL since, on the basis of a forensic audit investigation and an FIR filed by the Central Bureau of Investigation (CBI).

BPSL had availed various loan facilities from 33 banks/ financial institutions between 2007 and 2014 and the outstanding defaulting amount was Rs 42,074 crore as on January 30, 2018. The CBI is probing an illegal diversion of funds through various modus-operandi.

The latest amendments to the IBC largely dealt with the approval of a resolution plan. It addressed the concerns of the lenders, the hierarchy of distribution and made it clear that the resolution plan was binding on all. But Rao pointed out a clarification on immunity to the corporate debtor was also required as there could be claims from other departments of the government which could eventually result into some problem in the future.

"What happens if there are ongoing litigations. Is the corporate debtor obliged to make any additional payment. This needs more clarity," he said.

JSW has already sought immunity from litigation at the NCLT in the BPSL case. The NCLT is likely to take it up when it passes an order on the resolution plan.

It has also raised the issue with the Ministry of Corporate Affairs (MCA) and the Insolvency and Bankruptcy Board of India (IBBI).

Among the latest set of amendments brought about by the government in the IBC, one of the aspects is that the plan would be binding on all stakeholders including the central government, any state government or local authority to whom a debt in respect of the payment of dues may be owed.

However, Saurav Kumar Partner, IndusLaw, said, while the amendment had great persuasive value, either the IBC would need further clarification or amendments in other laws would have to be made. "It can't be taken as given," he said.

While the IBC had overriding powers on all other clauses, there was another section that said that the resolution plan should comply with all other applicable laws.

"There are interpretational issues," said Rao.

Claims from different departments had also come up in the case of Monnet Ispat & Energy which was acquired under IBC jointly by AION and JSW.

Based on that experience and what is happening in different IBC cases, in the case of BPSL, we approached for this specific immunity, explained Rao.

However, Rao clarified that while JSW has sought specific immunity on this count in BPSL, there were no second thoughts on the acquisition.

Amid weak demand, JSW not to bid aggressively for Odisha iron ore blocks

JSW Steel has decided not to bid aggressively for Odisha iron ore blocks in the next auction, owing to weak steel demand.

JSW Steel bid aggressively for three category-B iron ore blocks in Karnataka last month, and is unlikely to pay a premium for the Odisha blocks, said a senior JSW Steel official.

The bidding will be in two phases — the third week of August and September. Eight mines with reserves of around 573 million tonnes (mt) are expected to come up for auctions in August. A JSW spokesperson was not immediately available for comment.

"Odisha has a huge supply potential of iron ore but there is a lack of matching demand for such a huge quantity. Therefore, there is a potential risk to pay a huge premium for Odisha iron ore blocks," said the official.

Quarter-on-quarter steel demand across sectors — automotive, capital goods and consumer goods — was weak, though infrastructure and construction improved marginally.

Total finished steel stock at the end of April 2019 was at 9.93 mt compared to 7.49 mt in the previous year. At the end of May 2019, it was at 10.1 mt vis-a-vis 7.4 mt in 2018. 

The weak demand pushed the prices of hot-rolled coils down by around Rs 2,500 a tonne since May and TMT bars by Rs 5,000 a tonne during the same time.

For JSW, bidding aggressively for the Odisha blocks would mean additional investment in a weak market, especially after having paid a premium for the Karnataka mines. JSW paid almost a 100 per cent premium for the Karnataka iron ore blocks.

Logistically also, Karnataka makes more sense for the company as it requires around 25 mt of iron ore for its flagship 12-mt Vijayanagar steel plant, the senior JSW official pointed out.

Moreover, the capital cost for the development of iron ore mines in Odisha will be much higher compared to other states due to the imposition of the recommendations by the National Environmental Engineering Research Institute, which prescribes to set up of slurry pipeline or railway siding or conveyor in case of mines producing more than 5 mt. Almost all mines in Odisha have a production capacity of more than five million tonnes. 

Currently, JSW Steel has 18 mt installed capacity, of which Vijaynagar accounts for 12 mt. The target, however, is to reach an installed capacity of 45 mt over the next decade.

According to JSW, availability of iron ore wouldn't be an issue and hence, a mine at a premium at this point didn't make sense. "At present, the mining companies do not have an obligation to produce and can reduce the production as per market demand. But once the mines are auctioned, new owners need to produce minimum 80 per cent of rated mine capacity even if there is no matching logistics infrastructure or market demand," the company official said.

Odisha produced around 120 mt of iron ore in financial year 2018-19, which is more than 50 per cent of India's total production.

JSW Steel raising $500 million from overseas bond sale

Leading alloy-maker JSW Steel is entering the dollar bond market with a benchmark issue to raise up to USD 500 million in debt, sources said Thursday.

The issue has received Ba2 rating with a positive outlook by global ratings agency Moody's Investors Service.

The fund raising is in line with a May 2017 board resolution to raise up to USD 1 billion in one or more tranches by selling bonds in the international markets, the company informed the exchanges.

Merchant banking sources confirmed that the company is looking to raise up to USD 500 million through the bond sale.

The company, one of the largest steel producers in the country with an installed capacity of 18 million tonne per annum, informed the exchanges that its senior management will be holding roadshows in Hong Kong, Singapore and London next week for the bond issuance.

In a note, Moody's said proceeds from the issue will be utilised for retiring some debt and also for capital expenditure.

The company has USD 500 million of senior unscured notes maturing in November and an equal amount in unscured bonds maturing in April 2022, the agency said.

The rating reflects the company's large-scale and strong position in its key markets, good product and end market diversification, it added.

Meanwhile, its peer Fitch Ratings while assigning a 'BB' rating for the issue, said the rating reflects its highly competitive conversion costs and position as one of the largest steel producers in the country.

A further increase in planned capex, following a jump in planned capex in 2018, or significant weakening of global steel industry fundamentals could weaken its financial profile, it added.

The agency also cautioned about a likely moderation in the strong margins and risks from acquisitions.

The JSW Steel scrip closed 2.41 percent up at Rs 294.85 on the BSE, as against gain of 0.46 percent on the benchmark.