top of page
Men in Suits

Bhushan Power and Steel


A company named Jawahar Metal Industries Pvt Ltd was incorporated in 1987 in Sahibabad. This steel plant was struggling to survive after which the management was then taken over by Brij Bhushan Singhal and his sons Neeraj Singhal and Sanjay Singhal. The company turned into a deemed public limited company two years after its incorporation in 1989. The company was renamed in 1992 as Bhushan Steel and Strips Ltd after it diversified into wide-width cold-rolled (CR) steel strips.

The steel industry is majorly categorised into primary and secondary sectors. The primary sector basically produces raw materials such as pallets, coils, plates, billets, and rounds, whereas the secondary sector makes rods, coils, and sheets. Bhushan Steel majorly ventured into the secondary market and served automobile customers to a large extent. They had set up large plants in Odisha, Khopoli, Sahibabad and Hosur.

The company witnessed early success and reached great heights as it possessed an advanced vision. They integrated Japanese high-end technology into their steel-manufacturing process. They thus opted for an unconventional and innovative mode of production to stay ahead in the game. During this period, the steel industry was doing very well. The demand for Bhushan Steel increased considerably because of the increased market demand and its effort to bring forth something new. The name of the company was taken together with the name of the existing steel biggies and soon it emerged as the third largest steel producer in India. It supplied steel to major automobile players like Tata Motors, Maruti Suzuki and Mahindra.

If everything was running in its favour, how did it become one of the biggest loan defaulters in India? Below is an attempt to understand what went wrong for the company.

What went wrong?

Things are not what they appear to be and this phrase perfectly fits Bhushan Steel. The Investors, banks and market leaders could only see the company flourishing but little did they know about the mistakes that the company was surrounding itself around.

A new plant in Odisha

The raw materials that the company used were mostly imported. This restricted their production activities as there was not enough supply of ore and coal. They had limited control over the availability, quality and cost of input steel. In order to solve this issue, they came up with the idea of constructing a new integrated steel plant in Odisha. This project was very capital-intensive and the company had to raise a huge loan amount for its construction. However, as the steel industry was at its peak during this time and the company was one of the largest players, banks did not hesitate to grant them loans. Several banks’ projects financed the company. After receiving huge loan amounts, Bhushan Steel started the construction work in 2005. The first phase of construction was completed by 2009-10.

Financial Crisis of 2008

The 2007-08 financial crisis was a worldwide economic crisis. Every sector underwent extreme stress including the steel industry. This marked the beginning of the drastic fall of Bhushan Steel. The prices of steel declined to an all-time low from $1265 per tonne to $300 per tonne. The steel industry was completely shaken by the crisis.

A decline in market demand in China

A huge proportion of steel produced was exported to China. Chinese demand played a huge role in the company’s business. When demands from the Chinese market sharply declined, it had a severe impact on the company’s business. The sales and profits of Bhushan Steel witnessed a turnaround.

A pile of debts

The company had already raised a huge sum from banks to construct the steel plant in Odisha. Loans had been borrowed from several banks, including SBI, Canara bank, PNB, ICICI bank, Syndicate bank and Axis bank. The management had all its hopes eyed on the completion of this plant as they believed that only this project could take them out of the market crisis. The company was already in debt of ₹11,404 crore by the end of FY 2010-11. It was still not willing to stop its loan-borrowing spree and raised more loans from the same banks because it wanted to finish the project at any cost. The company was of the opinion that once the plant started operating, it had the potential to generate massive profits with which it would repay its debts easily. The lenders too believed the company’s narrative and were optimistic about granting loans.

Where on the one hand the sales, profits and operations of the company were facing a severe slowdown, the company on the other hand kept on borrowing and increasing its liabilities. In 2013, a hazardous accident killed three and injured twenty-nine workers, further creating barriers to its completion. Shockingly, another loan of ₹18000 crore was borrowed by the company to revamp the situation, keeping its stocks as security. It is unfortunate to see the inability of banks to foresee the risk in their lending decisions. It also reiterates the importance of risk assessment and the presence of a qualified risk management committee in a bank.

Quite evidently, the situation kept on deteriorating and Bhushan steel was left in no position to pay interest on the loan amount. The company’s debt from ₹35,710 crore in 2014 scaled up to ₹46,062 crore in 2016. The borrowing spree turned into a mountain of debts for the steel giant. According to its 2014 annual report, it spent ₹1,600 crore annually to pay off interests but the profits earned mostly hovered around ₹62 crore.

The debts soon turned into bad debts as the company started defaulting on loan repayments.

Business ethics were cut loose

A reading of the case compels us to think about why did the banks continue giving fresh loans when the company was defaulting on earlier loans. This rang suspicion bells among the diligent, after which enquiries took place.

When the CBI started investigating, many revelations of bribery were made. For instance, the company had obtained a credit extension from Syndicate bank by bribing ₹10 lakh to its then Chairman Shri Sudhir Kumar Jain even after it defaulted on ₹100 crore loan repayment to the bank. In furtherance, the CBI arrested the company’s vice chairman Neeraj Singhal.

All the negative publicity around Bhushan Steel and Strips Ltd had a drastic impact on its stock price. The stock which was trading at ₹400 in August 2014 crashed to ₹43.70 in September 2015.


The company entered insolvency proceedings in 2014. Later, Tata Steel took control of Bhushan Steel and Strips Ltd. It repaid a debt of around ₹35, 200 crore. It also renamed the company to ‘Tata Steel BSL’.

Corporate governance failure

It can be concluded that it was not only bad luck which led to a giant default. Bad management decisions on part of Bhushan Steel and Strips Ltd and practice of bribery on part of bank officials, along with a lack of project monitoring and due diligence on part of banks led to this entire fiasco. Corporate governance is not only about board structure but is also about acting ethically and taking proper strategic decisions. It also highlights major loopholes in the banking system of the country. Every organisation should have an anti-corruption and anti-bribery policy in place to ensure the upliftment of ethical behaviour.

Our Directors’ Institute- World council of Directors can help you accelerate your board journey by training you on your roles and responsibilities to be carried out in an efficient manner helping you to make a significant contribution to the board and raise corporate governance standards within the organization.

Our ESG Expert certification will help you to amplify your understanding of corporate governance in a detailed manner paving a way for you to become a globally recognized ESG leader.

38 views0 comments


  • alt.text.label.LinkedIn
  • alt.text.label.Facebook
bottom of page