Now that the banks have decided to take Essar Steel, Electrosteel Steels, and Bhushan Steel to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC). The outcome could be one of the three — closure, sell-off of assets or revival.
Big fish to eat the little ones?
If sell-off emerges as an option, who could be the buyers? India's steel landscape is dominated by Tata Steel, JSW Steel and state-owned Steel Authority of India Ltd. (SAIL), while there are many smaller players like Jindal Steel and Power, Maharashtra Seamless and Welspun Corporation.
The combined production capacity of the three defaulters is around 18 million tonnes per annum and together, they owe around Rs 1 lakh crore to banks.
Before we get to the finer details, here are some details about the steel industry globally:
China, Japan, and India are the top three steel producers of the world.
In 2016, Global steel production rose almost 1 percent to 1,628 million tonnes, with China accounting for 808.4 million tonnes, or 49.6 percent, of the total world output. Japan produced 104.8 million tonnes while India's crude steel production was 95.6 million tonnes, an increase of 7.4 percent over 2015, according to the World Steel Association (WSA).
India's steel production crossed 100 million tonnes in 2016-17; the country is aiming for a cumulative capacity of 300 million tonnes per annum and production of 255 million tonnes by 2030, according to the National Steel Policy unveiled last month.
|Company||Production capacity*||Financial Performance FY2017||Debt as of March 31, 2017|
|Tata Steel#||9.7 MTPA||India sales: Rs 53,261 croreNet Profit: Rs 3,445 crore||Net debt Rs 72,367 crore|
|JSW Steel||18 MTPA||Sales: Rs 56,913 croreNet Profit: Rs 3,577 crore||Net debt Rs 41,549 crore|
|SAIL^||14.3 MTPA||Sales: Rs 49,180 croreNet Loss: Rs 2,833 crore||Not Available|
Source: Company filings, reports
*: Crude steel, million tonnes per annum (MTPA).
#: The capacity refers to its plant in Jamshedpur. The company is setting greenfield projects in two Jharkhand and Chattisgarh while the Kalinganagar plant will increase its capacity by 3 MTPA. The global capacity of the company is 29 MTPA.
^: The capacity will increase to 21.4 MTPA after the company's expansion initiatives are completed.
Share prices hit
The news of lenders deciding to recover their loans impacted the share prices of other steel companies also on Friday. At around 1.40 pm, SAIL was down 1.54 percent to Rs 57.55, Tata Steel was trading 1.31 percent down at Rs 507.80 while JSW Steel was almost flat at Rs 196.10, on the Bombay Stock Exchange (BSE).
Now the big question remains, who will finally get to take the 'troubled companies' home?