JSW Steel may double its bid for Bhushan Steel to Rs.30,000 crore and that sets the stage for an aggressive bidding war with Tata Steel and Arcelor Mittal. The committee of creditors had set the liquidation value of Bhushan Steel at Rs.15,000 crore and the JSW offer is nearly twice that. Bhushan Steel is among the 12 NPA accounts identified by the RBI for resolution under the Insolvency code. Bhushan Steel has outstanding loans of nearly Rs.45,000 crore and that is more the market value of the company, almost making continuation of the business unviable.
Telecom sector and private equity deals took the total deal size in the year 2017 to $60 billion as a pre a report put out by Grant Thornton. The number of deals at 1485 was sharply higher than the 1147 deals reported in the previous year. The momentum was provided by big ticket consolidation as distressed debtors hived off their key assets to monetize these assets and repay their debt. The telecom sector was the virtual leader and contributed $25 billion worth of deals during the year. With the government focus on IBC, the M&A action could continue unabated in 2018 also.
Speaking at the World Economic Forum in Davos, Donald Trump emphasized that his “America First” policy would actually benefit other nations too. Trump underscored that when the US grows then the world grows with it and also reminded the US of the millions of jobs that it had helped create around the world. Interestingly, Donald Trump is the first US president to visit the WEF after a gap of nearly 18 years. Trump also underscored that the US was all for free trade provided it was fair and reciprocal. Trump also assured the WEF that tax cuts would be a launch pad for the whole world.
Tata Steel has underlined that it will bid for steel assets as part of its inorganic expansion only if it is available at a reasonable price. Tata Steel is currently bidding for the assets of Electrosteel Steels, where Vedanta is the other bidder. However, Tata Sons chairman Chandrasekharan emphasized that the primary focus would be to put the European business in order before embarking on the Indian side of the business. Tata Steel has already sold its unprofitable operations in UK and has merged its European operations with Thyssen Krupp of Germany.
Even as Trump begins to turn more protectionist, Europe is looking at a new trade deal to counterweight the impact of America’s inward looking trade policy. In fact, top officials from the EU will be meeting with the Mercosur group consisting of Argentina, Brazil, Paraguay and Uruguay in Brussels to explore trade agreements with the EU. With Trump’s protectionist approach and UK’s decision to walk out of the EU, the union is left with no option but to focus on the other trade blocs to build up its presence. EU is also simultaneously looking at free-trade pact with Asian nations like Singapore, Vietnam and South Korea. Trump has almost triggered a tariff war by imposing special tariffs on imported solar panels. Current trade between EU and Mercosur is worth $105 billion and the trade deal could be big!
Foreign investors have pumped in nearly $3 billion into Indian markets since the beginning of January this year. This is the total inflows into equity and debt and appears to be driven by expectations of an earnings recovery and also attractive yields on debt. Interestingly, the inflows into equities were almost twice the inflows into debt and there are still 3 days to go for end of the month. The big event will be the rate hikes (3 to 4) in the year 2018 and the withdrawal of liquidity by the central banks. Both these factors are negative for EMs like India and could trigger risk-off flows out of EMs.
