Sanjeev Gupta’s $6bn InfraBuild working with Barrenjoey amid talk of looming sale

InfraBuild is understood to be working with Barrenjoey advisers, fuelling suggestions that a sale of the business could soon be in the works. Picture: Katrina Bridgeford

Sanjeev Gupta’s $6bn steel business InfraBuild is understood to be working with Australian investment bank Barrenjoey, fuelling suggestions that a sale of the business could soon be in the works.

InfraBuild has over 150 locations nationally, more than 5000 employees, 26 domestic recycling centres and 113 retail and distribution sites.

It is Australia’s largest processor and distributor of steel long products, including reinforcing bar, reinforcing mesh, tubular and hollow sections, merchant bar and wire products.

Canadian private equity fund Brookfield has previously run the ruler over InfraBuild, while an acquisition could also make sense for Kohlberg Kravis Roberts.

The company had been earmarked for a float last year, but despite soaring steel prices, adding support to the company’s earnings, a float never proceeded, as Mr Gupta wrestled with challenges across his broader empire.

While the float remains officially on the agenda, most expect that a sale will be on the cards.

The company is part of the global steel operations of Mr Gupta’s company GFG Alliance that early last year was said owe at least $US5bn to lender Greensill.

Credit Suisse, in turn, was a lender to Greensill, with about $US2.3bn of problematic loans in its Greensill Capital Funds following the lender’s collapse.

Yet InfraBuild has no Greensill loans.

An InfraBuild spokesman said the company had a standalone, traditional capital structure supported by a high yield bond and working capital facility.

They declined to comment on the speculation about a sale.

The understanding is that InfraBuild is generating about $6bn of annual revenue as it prospers amid the favourable conditions, and earnings before interest, tax, depreciation and amortisation of $600m.

The company’s debt level is believed to be around $2bn.

For the half year, it generated $2.94bn of revenue as it increased its steel volumes and scrap volumes sold by seven per cent.

While Barrenjoey has been linked to InfraBuild, it is understood that InfraBuild has also been gaining assistance from other investment banks.

InfraBuild provides products to customers in the nation-building infrastructure, building, construction, rural and mining sectors.

Its scrap metal recycling sites across Australia includes four shredders, and the recycling business units contribute about 1.4 million tonnes of scrap metal annually into its steelmaking operations.

Internationally, it owns and operates recycling centres in Poland, the US and Hong Kong, along with having global scrap metal traders working in India, South Africa, Netherlands, Spain and the UK.

Manufacturing and steel making operations include two steel long product producing electric arc furnaces at Rooty Hill in Sydney and Laverton, Melbourne and it has eight product manufacturing mills in Laverton, Geelong, Rooty Hill, Newcastle and Brisbane.

Manufacturing facilities also exist in Dalian, China.

Its Steel in Concrete distribution stream includes InfraBuild Reinforcing, and the Australian Reinforcing Company.

Market observers question whether Mr Gupta could be a motivated seller after recent reports out of the UK have centred on unpaid tax bills by his companies worth STG26m.

Winding up orders were issued against his British Liberty Steel operations, but they were later dropped, the reports said.

After the price of steel was thought to have peaked last year amid the global pandemic, there are suggestions that another rally could be unfolding for the commodity price amid the war in Ukraine with Russia with a feared shortage of materials used for manufacturing.

The price of Generic Hot-Rolled Coil Steel is trading at about $US1125 per tonne after soaring to $US1650 in June last year.

One possible option for InfraBuild is a break-up of the company, which may happen following an acquisition by private equity.

Australian listed steel manufacturer BlueScope could face opposition from the Australian Competition and Consumer Commission when it comes to an acquisition for part of the business, while groups like the recently listed steel distribution company Vulcan could be an acquirer of some parts.

Assets within the InfraBuild business were part of Arrium before it collapsed.

Mr Gupta also took on Arrium’s challenged steel mill in South Australia, Whyalla.

The purchase of the steel assets, iron ore mines and Whyalla Port and Rail cost about $700m in 2017.

Whyalla would no doubt be profitable right now, but it is said to be in need of hundreds of millions of dollars’ worth of investment.

InfraBuild is run by former Cleanaway boss Vik Bansal.

Mr Bansal worked at Infrabuild when it was OneSteel from 2007 to 2010, where he led the steel distribution and metal processing division.