Bhushan Power and Steel (BPSL), a key player in India’s steel industry, has once again become a subject of interest in the steel sector following the Supreme Court’s order to liquidate the company. The apex court rejected the resolution plan proposed by JSW Steel, leading to a renewed focus on the assets of Bhushan Power and Steel, with many national and international steelmakers showing interest. Here’s a breakdown of the situation and what it means for the future of BPSL and the steel sector.

Supreme Court's Liquidation Order

On May 2, 2023, the Supreme Court of India ordered the liquidation of Bhushan Power and Steel after rejecting the JSW Steel resolution plan. The court's decision has sent shockwaves across the Indian insolvency framework, particularly in the steel industry. This ruling marked a significant shift in the way Insolvency and Bankruptcy Code (IBC) processes are handled in India.

The Supreme Court cited two main reasons for rejecting JSW's plan:

1. JSW Steel’s use of a combination of equity and optionally convertible debentures (OCDs) to complete the acquisition, which the court deemed as non-compliant with IBC rules.

2. Failure to implement the resolution plan within the mandated time frame, leading to a delay in resolving the financial troubles of Bhushan Power and Steel.

This judgment has set a precedent for insolvency processes in India, reinforcing the need for adherence to timelines and clear structuring of resolution plans under the IBC.

Potential Bidders for Bhushan Power and Steel Assets

Following the Supreme Court’s order, there has been a wave of interest in Bhushan Power and Steel’s assets. According to a Business Standard report, several national and international players are now keen on acquiring these assets. The auction for BPSL’s assets may take some time, but steel giants like JSW Steel and Jindal Steel and Power (JSPL) are expected to make a move.

JSW Steel, despite the setback with the Supreme Court's ruling, may still rebid for Bhushan Power and Steel’s assets. Rahul Dwarkadas from Veritas Legal stated that there is no legal barrier preventing JSW from re-entering the bidding process unless there is a specific observation by the Supreme Court. This possibility stems from the fact that JSW Steel had already paid Rs 19,700 crore of BPSL’s debt to creditors back in 2021, a significant commitment to the company’s financial restructuring.

On the other hand, Jindal Steel and Power, led by Naveen Jindal, is also a potential bidder for BPSL. JSPL has been a prominent player in India’s steel sector, and this acquisition could further strengthen its market position.

Why This Acquisition is Crucial

The acquisition of Bhushan Power and Steel is of immense significance due to the company’s operational capacity. Under the leadership of JSW Steel, Bhushan Power’s production capacity was nearly doubled, rising from 2.75 million tonnes to 4.5 million tonnes. This expansion has positioned Bhushan Power as a major player in the Indian steel market, and any buyer of its assets will gain significant production capabilities, making it an attractive proposition for prospective bidders.

Moreover, Bhushan Power’s assets include advanced facilities and equipment, which would allow any new owner to benefit from existing infrastructure, further enhancing their market competitiveness.

The Impact on India’s Insolvency Framework

This case has far-reaching implications for India’s insolvency and bankruptcy framework. The Supreme Court’s judgment in rejecting the resolution plan has raised questions about the flexibility of the IBC process and its ability to effectively resolve distressed companies. Ketan Dalal of Katalyst Advisors highlighted that the judgment will likely set a precedent for future cases, shaping the insolvency landscape in India.

This decision underlines the importance of timely resolution plans and compliance with IBC regulations, sending a strong message to corporations and insolvency professionals about adhering to the legal framework.

Financial Outlook for BPSL and the Steel Sector

The ongoing insolvency proceedings and liquidation of Bhushan Power and Steel have significant financial ramifications for the company, its creditors, and the broader steel sector. The auction of BPSL’s assets will likely be a major event in the steel industry, attracting a lot of attention from key players.

For JSW Steel, the ability to re-enter the bidding process could prove beneficial in expanding its footprint in the steel sector, while Jindal Steel and Power may see this acquisition as an opportunity to strengthen its market share.

Conclusion

The liquidation of Bhushan Power and Steel by the Supreme Court of India has set the stage for a renewed auction of its assets, with major players like JSW Steel and Jindal Steel and Power showing strong interest. As the legal proceedings unfold, this case will shape future acquisitions and insolvency resolutions in India’s steel industry.

For now, the industry watches closely as JSW Steel, Jindal Steel, and other potential bidders evaluate the prospects of acquiring Bhushan Power’s valuable assets.

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