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JSW Steel joint venture acquires India’s Monnet Ispat

11 Apr 2018 05:21 (+01:00 GMT)
JSW Steel joint venture acquires India's Monnet Ispat

Singapore, 11 April (Argus) — A joint venture between private-sector Indian firm JSW Steel and investment fund Aion Investments and has won the right to acquire Indian steelmaker Monnet Ispat, which becomes the third bankrupt steel mill in the country to find a new buyer this year.

The joint venture won an auction initiated by Monnet's creditors to sell off the bankrupt company, which owes banks around $1.6bn. Monnet operates a 1.5mn t/yr integrated steel plant in the central Indian town of Raigarh.

India's central bank last year asked lenders to take Monnet Ispat, Bhushan Steel, Bhushan Power & Steel, Essar Steel and Electrosteel to the bankruptcy court, after the companies built up billions of dollars in debt. The court approved an auction process to sell the companies to help lenders recover some of their debts.

Bhushan Steel has already been bought by private-sector Tata Steel through the auction process. The company, which owed debtors over $7bn, is a secondary steel producer with 5.7mn t/yr of capacity to produce hot and cold-rolled flat products.

India-focused mining company Vedanta has acquired Electrosteel, which operates a 2.5mn t/yr integrated steel plant in the eastern city of Bokaro.

A second round of bidding is underway for Bhushan Power & Steel, part of the Bhushan group, which operates a 2.3mn t/yr integrated steel plant in the eastern state of Odisha. Tata Steel and JSW Steel are the key bidders for the firm.

The largest steelmaker being auctioned is 10mn t/yr producer Essar Steel, for which a second round of bidding was held last week. There are three bids for Essar Steel — from joint ventures between Luxembourg-based ArcelorMittal and Japan's Nippon Steel & Sumitomo Metal, JSW Steel and Mauritius-headquartered investment company Numetal, and Vedanta. The winner is expected to be declared this week.

Essar operates a steel mill in the west Indian town of Hazira and also has iron ore pellet capacity of 20mn dry metric tonnes/yr, making it the country's largest pellet maker and exporter.

The sale of the bankrupt companies is likely to lift capacity utilisation in India's steel sector and possibly lead to more capacity additions. An acquisition by a larger steelmaker would help companies negotiate lower imported coking coal and iron ore prices, and get more business from large domestic industrial consumers and export markets.

Another auction round may be held for smaller, secondary steel producers, but this is unlikely to have as big an impact on the steel industry.

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