This good news
for them is that the committee of creditors has given Tata Steel
the clearance to acquire 5.6-mtpa Bhushan Steel and a consortium led by AION-JSW
the go-ahead to take control of Monnet Ispat.
This will help in the consolidation of the market and the capacity market share of the two players is set to go up from 24 per cent to nearly 30 per cent, which will help them to command a premium price in the market.
And their share of private sector steel capacity (excluding SAIL) will hit around 34 per cent.
And with these two steel companies
in their stable, they will have more than 55 per cent of the capacity of the top five steel players, including Steel Authority of India (17.5 mtpa).
Their share could increase once a decision is taken on Bhushan Power & Steel, in which Tata Steel
was the highest bidder, followed by JSW.
But the NCLT has allowed the bid of Liberty House, which has apparently emerged as a higher bidder than Tata Steel. An outcome is likely in a few weeks.
If this stressed asset is to go to either Tata Steel or JSW, their share in the overall steel capacity would go up to over 32 per cent, and, among the private players, to 37 per cent.
That apart, JSW and Tata Steel have lined up a brownfield expansion of 5 million tonnes each, which is likely to be completed by 2020. With the expansion, and the success of the assets won by the two players so far, JSW and Tata Steel, with anything between 48 mtpa and 51 mtpa, would control much more than a third of the country’s steel capacity. And in flat steel their share could be over 40 per cent, giving them substantial pricing power.
“Even if one excludes the possibility Tata Steel and JSW acquiring Bhushan Power & Steel
and Essar Steel, their share in domestic capacity is likely to increase to almost one-third in the next 3-4 years. Their share in the flat steel segment will be even higher, which may increase their influence in this segment of the steel market,” said ICRA senior vice-president Jayanta Roy.
had joined Numetal in a step-down subsidiary for Essar Steel, which has a nameplate capacity of 9.7 million tonnes, but its bid was found to be invalid by the NCLT. It is now pushing for a fresh round of bidding for Essar Steel.
The battle is now on the third player which would replace the position left by Essar Steel. And that would depend on who acquires this asset.
The new kid on the block could either be the ArcelorMittal-Nippon Steel combine or the Russian major VTB Capital-led consortium, Numetal. But if a rebid is allowed, JSW could join the party.
But now, the battle is between ArcelorMittal and Numetal as the first round of bids is being examined.
Arcelor Mittal, one of the world’s largest steel players, has nothing in India. It has sold its stake in Uttam Galva. But winning Essar Steel would change that equation. The group has announced, if it gets Essar Steel’s 9.7 mtpa assets, it will invest in the company to increase its capacity to 18 mtpa, closing in on the domestic big boys.
Analysts say many of the competing steel players in the country are worried about its financial strength and its ability to expand capacity.
The Russian private equity fund, VTB Capital, which has a 40 per cent stake in Numetal, has no operational experience in running a steel unit. But it has invested in steel companies across the world and this will again be its first entry into this sector in India.
Both the bids may have to go through rectification.