IBC process to push consolidation in steel industry, says EY

IBC process to push consolidation in steel industry, says EY

The Insolvency and Bankruptcy Code (IBC) will accelerate consolidation in steel industry and help many global players who have been struggling to enter India, EY said on Thursday.

Many of the cases referred to the National Company Law Tribunal (NCLT), under the IBC process, are from the steel sector, said Anjani Agarwal, EY Partner and Global Steel Leader. "What will be the likely impact of that for the industry. That's the area of very interesting transformational subject and the whole landscape is suppose to change," he said. He was speaking during India Minerals and Metals Forum here. The IBC process being on a fast track resolution mechanism, a substantial part of the debt will be quickly realised or renewed and moved to a more sustainable cash flow structures, Agarwal said.

"The intense competition amongst bidders also bodes well for potential write backs of the provisions of lenders. A healthier banking industry, with unlocked flow of capital, will now be in a position to fund huge investments required to build new capacity for meeting future metals demand for the country," he added. There has been a wave of consolidation in the steel industry globally but not reflected within India as yet, he said, adding that insolvency process has triggered this and will also witness the theme playing out domestically. "Globally the wave of consolidation that happened in the steel industry eluded India. But this is one trigger which will fast forward and accelerate consolidation in the Indian industry. We are already seeing that happening. Tata Steel has acquired one, JSW has acquired one," he said.

Over a period of a year or so, several key players are already in the process or are on the cusp, would have undergone a resolution, he said. With the balance sheet problem having been resolved or deferred, stronger metals industry will emerge post this restructuring with sustainable debt levels, he added. Stronger players are already using this opportunity to consolidate their position in the country and some new players from other sectors are also entering the fray thereby broadening the canvas, he said. The Indian players, he said, are also seeking synergy and hence they will be active player in the consolidation game.

"With the new players entering, the whole vendor supplier customer relationship is going to be reworked in the country and which is the big disruption for the front player as well as opportunity for many," he added. Hopefully the governance standards in the country particularly the metal industry and steel industry might improve, he said. 

The Business Standard, New Delhi, 22nd June 2018