How UK based Liberty House's Plans to Enter India Look Like?

Liberty House, the London-based metals group founded by India-born billionaire Sanjeev Gupta has been planning to enter the Indian steel circuit since long time. The Indian-origin entrepreneur has stormed India's corporate world with audacious bids for debt-laden companies that were being auctioned as part of bankruptcy proceedings.

Sanjeev Gupta has sensed the opportunity to enter India when India introduced one of its most radical pieces of reform, the Insolvency and Bankruptcy Code (IBC) to clean up the banking system.

The company has come to India with an investment plan of anywhere between USD 5-10 billion, which includes buying out a range of distressed assets, de-bottlenecking them and ramping up production capacities at the plants he buys out.

Liberty House's bid for four companies

Liberty House has placed his bets on at least four companies--ABG Shipyard Ltd (for INR 5,200 crore), Amtek Auto Ltd (INR 4,400 crore) and Adhunik Metaliks Ltd (for INR 600 crore), and the biggest of them all, Bhushan Power and Steel Ltd (for INR 19,700 crore) and has promised to invest up to USD 10 billion over next few years.

Out of these four companies, Liberty House has won Amtek Auto and Adhunik Metals and has secured funding for the two. However, the company has come under severe scrutiny from banks in case of its bid for Bhushan Power. A committee of creditors has disqualified Liberty House after it failed to provide critical information on funding arrangement despite repeated reminders.

Liberty House had run into trouble with Section 29 (A) of IBC when banks found that it owed USD 2.8 million to Exim Bank. This is because section 29(a) bars entities linked to insolvent companies, wilful defaulters and anyone with a non-performing loan from bidding for stressed assets. This clause led Liberty House being declared ineligible to bid for ABG Shipyard and Amtek Auto until it settled these outstanding dues. However, Liberty House settled its Exim Bank dues in order to become eligible for both the companies.

In case of fourth company ABG Shipyard, Liberty House has emerged as the sole bidder and its bid is accepted by the interim resolution professional (IRP). The company's resolution plan is now pending at the Ahmedabad bench of NCLT (National Company Law Tribunal). As per the latest market reports, in an interview, Sanjeev Gupta said that if Liberty House were to win the asset, he would re-purpose the facility to recycle metal scrap.

He said that the yard is well-located and it has got a good ship lift. It can be used for breaking ships for scrap which will serve their green steel (recycled steel) objective. The business model Mr. Gupta have in mind is completely different. ABG is a difficult asset and he is looking at the long-term play of making it into a steel plant. Building ships is not a viable business here and that's why shipyards are in the doldrums in India.

He confirmed that while ABG Shipyard will be repurposed, Amtek Auto will continue to be an auto player whereas Adhunik Metaliks will focus on alloy steels that will feed into Amtek and other steel component producers. In case if Liberty House acquires Bhushan (Power & Steel Ltd), it will be the start of Liberty House's primary steel business.

Along with the steel sector, Liberty House also plans to build electric vehicles in India and is also focusing on setting up of greenfield projects in renewables energy business particularly in solar.