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Bhushan Steel: a creditworthy company turned insolvent

Hemant Manuj (Department of Finance, S P Jain Institute of Management and Research, Mumbai, India)

Publication date: 23 May 2019


Learning outcomes

The purpose of this paper is to illustrate how a well-performing company can turn into a loss-making company on account of adverse industry cycle and poor management of risks in the business. The importance of factors like optimal level of leveraging, the ability of the management to deal with external and internal risks, and importance of corporate governance in the process of credit appraisal is understood from this case.

Case overview/synopsis

The case relates to the credit appraisal by the banks of a prominent steel company in India. The company, Bhushan Steel Limited, was doing very well. The banks lent aggressively to the company, based on their credit appraisal. However, the company soon turned insolvent on account of poor assessment of risks and deteriorating external factors. While this case may be analysed and studied through the eyes of both the Management and the lenders, the focus is currently on the latter. In a real-world scenario, the challenge for the lender is to sieve through the financial as well as non-financial data and make a valid conclusion on the level of credit worthiness of the borrowing company. This includes the topics of operational efficiency and synergies, commodity price cycles, external credit ratings, operating and financial leverage, regulatory risks and corporate governance.

Complexity academic level

Post graduate business management programmes – Finance specialisation.

Supplementary materials

Teaching Notes are available for educators only. Please contact your library to gain login details or email to request teaching notes.

Subject code

CSS 1: Accounting and Finance



This case has been written based entirely on secondary data; hence the consent of the organisation is not required. The references/ sources of data for the case have been listed at the end of the manuscript.

Disclaimer. This case is written solely for educational purposes and is not intended to represent successful or unsuccessful managerial decision-making. The authors may have disguised names; financial and other recognisable information to protect confidentiality.


Manuj, H. (2019), "Bhushan Steel: a creditworthy company turned insolvent", , Vol. 9 No. 1.



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Copyright © 2019, Emerald Publishing Limited

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