Steel Titans Eye Bhushan Power & Steel as Supreme Court Liquidation Order Reshapes Insolvency Landscape

Image Source: Business Standard

India's steel sector is preparing for a high-stakes bidding war after the Supreme Court directed the liquidation of Bhushan Power & Steel Ltd (BPSL), rejecting JSW Steel's ₹19,700-crore resolution plan and paving the way for leading domestic and overseas steelmakers to rebid for the coveted asset.

Key Highlights

The Supreme Court ruled JSW Steel's takeover of BPSL "illegal" on grounds of IBC violations and procedural failures by the Committee of Creditors. The court held that JSW's 2019-approved plan did not adhere to mandatory IBC requirements and that the company had made false representations and defaulted on its commitments for two years.

The liquidation direction follows four years since JSW Steel acquired a majority stake in BPSL, heavily invested, and upped its steelmaking capacity to 2.75 million tonnes to 4.5 million tonnes annually, with more increase on the way. The development now risks rolling back JSW's strategic inroads and lowers its overall capacity for steel-making by 12%.

The Supreme Court ruling comes after a long legal battle involving objections from operational creditors, previous promoters, and the enforcement agencies. The case was one of India's first major tests of its IBC ecosystem and had witnessed competing bids from Tata Steel and Liberty House before JSW won it.

As the liquidation process progresses, industry players anticipate renewed interest from top steel producers looking to increase capacity in India. The BPSL asset, with its enhanced operational parameters, is perceived as a prized catch for any player looking to strengthen its position in the market.

The ruling is likely to establish a significant precedent for India's insolvency resolution framework. It focuses attention on the role of the Committee of Creditors, the need for strict compliance with IBC processes, and the danger of post-resolution court challenges.

JSW Steel's shares plunged more than 5% following the judgment, a sign of investor worry about the company's future growth prospects and its implications for the steel industry and insolvency resolution in India.

Industry watchers will keenly observe how the liquidation process turns out, with possibilities of another high-profile round of bidding and a new chapter in India's maturing bankruptcy regime.

Sources: Business Standard, Moneycontrol, Law Trend, The New Indian Express