Can sanity come back to the Indian steel industry? This question was asked by many when reports surfaced that the Adani group might just be taking over the 2000 MW mega power project promoted by JSPL. Reports are also floating around that Essar Steel might just agree to a debt to equity swap whereby the pr,others will lose a substantial chunk of their holdings. And then, there are reports that JSW is pushing hard for a strategic takeover of the assets of debt ridden Bhushan Steel. Not a single one of these deals has been given the official stamp. Yet, these negotiations tell a lot about the fresh churn in the Indian steel and power sectors.
Taken together, JSPL, Essar Steel and Bhushan Steel account for much more than Rs 1 lakh crores in unpaid debt. In 2016, bankers had officially declared the money owed by Bhushan Steel as NPA. The other two have barely managed to keep up with their repayment schedules and even their debt is rated by many equity research firms as non performing assets. These three companies represent a clutch of infrastructure companies that launched really ambitious plans about a decade ago during the UPA regime. Barring a few, almost all of them have serious debt issues to deal with. Steel and power have become conjoined in this mess because many of these companies launched both steel plants and thermal power projects. Many of the same companies now face allegations in the coal scam and some have even been charge sheeted.
The list of potential buyers and sellers is interesting. Take Essar Steel, for example. Way back in the late 1990s, the Ruia family that controls Essar had run up a mountain of debt thanks to their a,bilious steel projects. Most analysts were of the opinion that the Ruias would not survive, since they also had serious investments in risky sectors like oil and telecom. But the Ruias survived. The telecom business was sold to Vodafone at a huge profit and the Ruias have recently struck a deal to sell off their stake in Essar oil to the Russian giant Rosneft. And yet, the group remains straddled with huge debts. Then comes JSPL which was the darling of investors and the stock market not very long ago. The promotor Naveen Jundal happened to be a powerful Congress MP in the UPA regime and JSPL kept growing relentlessly. But the company was first caught up in the coal scam and then hit badly by the economic downturn. At the moment, it is still a toss up whether the Adanis or the elder brother of Naveen Jindal. Sajjan who runs JSW takes over the power project. As for Bhushan Steel, bankers seem to have little hope of any money coming back to their coffers.
Much was expected when the NDA regime came to power in 2014. Even more was expected when the then RBI governor Raghuram Rajan vowed to clean up the NPA crisis faced by Indian banks because of steel, power and other infrastructure companies that had piled mountain loads of debt. Sadly, even as players negotiate more deals, there seems to be no end to the crisis.
