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    Tata - BSL Final.

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    Shubham Mishra
    A merger is the combination of two companies into one new entity, which occurred between Tata Steel and Bhushan Steel Ltd. This was a horizontal merger since both companies operated in the steel industry. Tata Steel's bid of Rs. 35,000 Cr was accepted over JSW's bid of Rs. 29,700 Cr by the National Company Law Tribunal in 2018 under insolvency proceedings. The acquisition allowed Tata Steel to double its capacity and gain a 50% market share in flat steel products. It also provided strategic benefits like access to new markets and synergies in procurement. However, it significantly increased Tata Steel's debt.

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    Tata - BSL Final.

    Uploaded by

    Shubham Mishra
    48 views15 pages
    A merger is the combination of two companies into one new entity, which occurred between Tata Steel and Bhushan Steel Ltd. This was a horizontal merger since both companies operated in the steel industry. Tata Steel's bid of Rs. 35,000 Cr was accepted over JSW's bid of Rs. 29,700 Cr by the National Company Law Tribunal in 2018 under insolvency proceedings. The acquisition allowed Tata Steel to double its capacity and gain a 50% market share in flat steel products. It also provided strategic benefits like access to new markets and synergies in procurement. However, it significantly increased Tata Steel's debt.

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    TATA- BSL FINAL.

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    A merger is the combination of two companies into one new entity, which occurred between Tata Steel and Bhushan Steel Ltd. This was a horizontal merger since both companies operated in the steel industry. Tata Steel's bid of Rs. 35,000 Cr was accepted over JSW's bid of Rs. 29,700 Cr by the National Company Law Tribunal in 2018 under insolvency proceedings. The acquisition allowed Tata Steel to double its capacity and gain a 50% market share in flat steel products. It also provided strategic benefits like access to new markets and synergies in procurement. However, it significantly increased Tata Steel's debt.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    48 views15 pages

    Tata - BSL Final.

    Uploaded by

    Shubham Mishra
    A merger is the combination of two companies into one new entity, which occurred between Tata Steel and Bhushan Steel Ltd. This was a horizontal merger since both companies operated in the steel industry. Tata Steel's bid of Rs. 35,000 Cr was accepted over JSW's bid of Rs. 29,700 Cr by the National Company Law Tribunal in 2018 under insolvency proceedings. The acquisition allowed Tata Steel to double its capacity and gain a 50% market share in flat steel products. It also provided strategic benefits like access to new markets and synergies in procurement. However, it significantly increased Tata Steel's debt.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 15

    TATA STEEL & BHUSHAN STEEL Ltd.

    GROUP - 4
    What is Merger ?

    A merger is the combination of two companies into one by either


    closing the old entities into one new entity or by one company
    absorbing the other.
     A merger is a financial activity that is undertaken in a large variety of
    industries: Healthcare, Financial Institutions, Private Investments,
    Industrials, and many more.
    There are Two main types of mergers: Horizontal and Vertical.
    MERGER

    + =
    Type of
    Merger
    Horizontal Mergers:
    It occur when two businesses in the
    same industry combine into one.
    This type of combination can cause
    anti-trust issues depending on the
    industry.
    In this case both the companies,
    TATA Steel and Bhushan Steel Ltd
    are into Steel (Metal) Industry.
    TATA STEEL V/S JSW
    • 2018 New Highlight
    • National company law Tribunal (NCLT)
    • CIRP process prescribed under the IBC Code
    • Bankrupt company (Insolvency and Bankruptcy code IBC )
    • TATA BID Rs-35,000 Cr
    • JSW BID Rs- 29,700 Cr
    • In a general sense & in the context of doing
    Why only business in India, it is always in the best interest
    of a corporate to acquire an asset rather than
    build it from scratch, especially for a greenfield
    BSL project.

    Company & • 16 November 2021Tata Steel BSL has fixed 16


    November 2021 as the record date for he

    When ? purpose of determining the shareholders of Tata


    Steel BSL who shall be entitled to receive fully
    paid-up equity shares of Tata Steel in the share
    exchange ratio as per the Scheme of
    Amalgamation.

    • This means, for every 15 shares of Tata Steel BSL,


    the investor will receive 1 share of Tata Steel.
    Following are the major hurdles a company may face:

    • Complex and expensive land acquisition cost, further court litigations.


    Bureaucratic delays, escalation of project cost, and in some case leading to
    complete scrapping of the project.
    • Timeline of 3.5 to 6 years before the start of production.

    So it’s in the best interest to acquire an asset, and that too when it is being
    sold in band of 60–80% of the actual book cost.
    Problem Faced By The Company?
    Following the successful resolution of insolvent Bhushan Steel, Tata Steel
    induced a portion of capital in the form of equity on taking over.
    Lenders, too, converted some of their Debt to Equity. This led to significant
    dilution of public shareholding in the erstwhile Bhushan Steel (now, Tata
    Steel BSL).
     
    Tata Steel is looking to double its
    capacity by FY22 to 23 MT, and
    Bhushan Steel (5MT) being major
    producer of Flat products, Tata Steel
    is poised to garner 50% market share
    in this segment with its acquisition,
    especially Northern region.
    Following other points that put Tata
    Steel in a favorable position is:

    • It’s very difficult to come up with a greenfield project at a strategic location, close to the current operational area
    of Tata Steel. It has a definite advantage and synergies in raw material linkage, procurement & marketing.
    • The commodity cycle for steel is in upsurge, and Tata Steel is looking to cash this opportunity before the
    downturn, and definitely hedge some part against the higher cost of acquisition.
    • The current EBIDTA or operating profit per tonne for Bhushan Steel is Rs. 7800, with 58% capacity utilization. Tata
    Steel will definitely look to increase it to Rs. 10,000 in near term by increasing the capacity utilization, efficiency,
    and ore from its own mines. (Tata Steel’s operating profit was Rs. 14000 per tonne in Dec quarter).
    • Additionally current location of Bhushan Steel, Ghaziabad & Khopoli in Maharashtra, is close to Auto hub of Pune
    & Gujarat, meanwhile Ghaziabad plant close to auto major Maruti Udyog, gives access to Northern market.
    Following info-graphic from Economic Times may further be helpful in understanding .
    This will definitely increase the debt on the balance sheet of
    Tata Steel to 1 lac crore, but it is hopeful that synergies
    created due to acquisition will be fruitful in the long run.

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