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Steel, cement asset bidders can take CCI nod after win, say experts

Dev Chatterjee/Mumbai 16 Feb 18 | 12:14 AM

Tata Steel, JSW Steel, and UltraTech bids for stressed assets in the cement and steel industries, under the Insolvency and Bankruptcy Code (IBC) regulations, will not face hurdles from competition laws, claim experts.

Bidders for stressed assets in cement and steel industries will have to take approval from the Competition Commission of India (CCI) and lenders only after they win a bid — and not at the time of bidding.

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Some competitors have claimed that the bids of UltraTech Cement for Binani Cement, and JSW Steel’s and Tata Steel’s bids for Bhushan Steel and Bhushan Power were violating CCI regulations that barred concentration of an industry’s capacity with one or a few players.

Bidders, however, are of the opinion that the IBC process should be exempted from CCI regulations, like the earlier Board of Industrial and Financial Reconstruction cases.

“This grey area has not yet been clarified by the government and is now being raised by some competitors," said a bidder, who did not want to be named.

For Binani Cement, UltraTech’s competitors are Dalmia Bharat Cement, stock broker Rakesh Jhunjhunwala, JSW Cement, Ramco Cement, and Heidelberg Cement.

A few of them have said that since UltraTech already had capacity for 89 million tonnes per annum (mtpa), it should not be allowed to take part in this bid. Binani Cement has an operating capacity of 11.25 mtpa, at its plants in India, China, and Dubai. It also has limestone reserves in Rajasthan.

India’s total cement production capacity is 425 mtpa but the industry is producing only 280 mtpa because of lower demand from the domestic market.

Experts, however, feel UltraTech’s bid will not encounter any problem from the competition angle.

Nisha Kaur Uberoi, national competition head, Trilegal, said, “There are at least seven or eight other players in the market (Gujarat, Haryana and Rajasthan) to be affected by UltraTech’s bid. Recent expansion and new entry in this market is in line with CCI’s practice. Hence, the bid will not face any competition problem."

Bidders’ have offered up to Rs 60 billion to take over Binani Cement. Its debt, as of March last year, was Rs 37 billion.

The response to Binani was far better than to the 3-mtpa cement unit of Murli Industries. It was liquidated for Rs 4 billion, with lenders taking an 80 per cent haircut on debts.

Similar queries have been raised on JSW and Tata Steel bids for the Bhushan assets. Challengers have asked if Tata or JSW would become monopolistic in the auto and flat steel sectors on winning the bids.

But, JSW Steel officials have countered these concerns.

“The idea should be to protect and revive a stressed company under the IBC, so that the interests of lenders, employees, and non-financial creditors can be protected. Vested interests should not be allowed to raise queries at the last minute," said a bidder.

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