Tata Steel said it has has accepted the Letter of Intent for Bhushan Steel under the Corporate Insolvency Resolution Process of the Insolvency and Bankruptcy Code 2016.
The company did not give the bid details, but rumors have been flying around that the company bid about Rs 45,000 cr for the distressed asset.
Shares of Tata Steel were down 3% and Bhushan Steel up 11% in pre-opening orders today.
The move is likely to be a positive for Indian banks, who are owed around Rs 40,000 by Bhushan Steel.
Banks have written off or provisioned about 20,000 cr out of the 40,000 cr owed to them by Bhushan Steel. With Tata coming onboard, they could not only save the remaining 20,000, but also get back some of the money they wrote off.
The deal must get approval from the National Company Law Tribunal and the Competition Commission of India.
Bhushan Steel was one of the biggest cases of corporate defaults in the Indian Banking sector. A total of around Rs 6 lakh cr (Rs 6 trillion) is estimated to be tied up in bad loans to big corporations.
Tata Steel Group is among the top global steel companies with an annual crude steel capacity of 27.5 million tonnes per annum (MTPA) as on March 31, 2017.
It has operations in 26 countries and a commercial presence in over 50 countries.
The Group recorded a consolidated turnover of US $18.12 billion (Rs 117,420 crore) in FY17.
Tata Steel Group is spread across five continents with an employee base of nearly 70,000.