- Court directs liquidation of 3.5 mnt plant in Odisha
- JSW’s 5 mnt expansion plan for BPSL derailed
In a landmark judgment with long-term consequences for the rejuvenation of India’s stressed manufacturing assets, the Supreme Court has set aside the resolution plan for Bhushan Power & Steel Ltd. (BPSL) proposed by JSW Steel. The judgment, a copy of which is with BigMint, points out that “there was an entire spectrum of lacunas and flaws in the Resolution Plan of JSW with regard to non-compliance of the mandatory requirements under the IBC (Insolvency and Bankruptcy Code)”.
Why was JSW’s ‘Resolution Plan’ rejected?
According to the ruling, the upfront payments and commitment with regard to infusion of equity into the company was one of the main criteria on which JSW had scored the highest in the evaluation matrix determined by the Company of Creditors (CoC) and was chosen as the “successful resolution applicant”.
However, the ‘Resolution Plan’ was not implemented for about two years which violated the purpose of the IBC, with the net result that “the upfront payments as agreed to be made in the Resolution Plan within thirty days of the approval of the plan by NCLT was delayed by 540 days in respect of payment to the Financial Creditors and by 900 days in respect of payment to the Operational Creditors,” the court observed.
This had “frustrated the very object and purpose of the IBC”, according to the court which directed the NCLT to initiate “Liquidation Proceedings against the Corporate Debtor-BPSL”.
BPSL: Key facts
Located in Odisha’s Jharsuguda, BPSL recorded a crude steel production capacity of 3.38 mnt in FY’25, as per BigMint data. The company has HRC capacity of 1.8 mnt and 1.2 mnt of CRC capacity, as well as flat colour-coated and galvanised products and pipes.
The facility churns out around 2.5 mnt of hot metal from operating blast furnaces. It has an EAF for crude steel production, hosts sintering and ore beneficiation facilities, and also coke oven and DRI production unit.
Potential impact on supplies
The future status of the plant and operations remains uncertain as of now. While the apex court has ordered liquidation of the asset, JSW reserves the right to seek a review petition.
In terms of impact on supplies, around 2.5 mnt of largely flat products such as HR and CR coils will be hit. It is understood that pipe manufacturers and re-rollers will be somewhat affected.
Moreover, it is estimated that around 200,000-300,000 t of pig iron supplies from BPSL will be affected if operations have to eventually wind down.
Setback for JSW?
BigMint data show that JSW Steel’s consolidated domestic capacity stands at 36.7 mnt of crude steel currently. So, if BPSL has a share of roughly 10% of current production. However, BPSL churns out value-added products such as colour-coated, galvanised sheets, pipes and wires.
JSW had envisaged to ramp up BPSL’s capacity to 5 mnt eyeing to benefit from the higher sales and realisations from value-added products. The company is aiming to raise the share of value-added and coated products in its sales mix.
Moreover, BPSL’s strategic importance was in its location in the eastern part of India where JSW has taken up considerable iron ore mining assets. The company’s Netrabandha iron ore mine in Odisha, expected to commence production in Q1FY’26 with an estimated capacity of 2 mnt/annum, could have resulted in significant cost optimisation of BPSL’s operations.
But now, with the BPSL expansion derailed by the court order, JSW’s target of 50 mnt of crude steel capacity by 2030 has received a minor setback. The company is most likely now to focus on its other investments in Odisha- notably the 5 mnt plant it has proposed to set up with POSCO, as well as the 13.2 mnt greenfield facility it is planning to set up with an outlay of INR 65,000 crore.
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