Case Study: Bhushan Steel’s Post-Shipment Finance Struggles and Its Impact on the
Business
Bhushan Steel Limited, once a leading steel manufacturer in India, was actively engaged in
exporting steel products to various international markets, relying heavily on post-shipment
finance to manage its cash flows while awaiting payments from foreign buyers. Given the long
credit periods in international trade, Bhushan Steel frequently used bill discounting and
post-shipment export credit facilities from banks such as Punjab National Bank (PNB), State
Bank of India (SBI), and other financial institutions to bridge the funding gap between shipment
and payment. This method allowed the company to receive funds immediately after shipping
goods rather than waiting for the buyers to make payments, which could take anywhere from 60
to 180 days. However, trouble began when the global steel market experienced a downturn,
leading to a decline in demand and financial instability among buyers, which resulted in delayed
payments. The delays meant that Bhushan Steel still had to repay the banks for the discounted
bills while facing liquidity issues due to outstanding dues from international clients. As the
situation worsened, the company struggled to meet its financial obligations, and the burden of
mounting interest costs on these post-shipment loans further strained its working capital. Since
post-shipment finance is based on the assurance that the exporter will receive payments within
a stipulated time, any delay in these payments creates a financial domino effect, impacting
cash flow, operational efficiency, and debt repayment capacity. Bhushan Steel, already
burdened with high debt, found itself in a deeper crisis as it was unable to repay the banks for
the loans it had taken against export bills. Furthermore, concerns over corporate governance
and financial mismanagement surfaced, exacerbating the company’s troubles. The banks, which
had provided post-shipment financing based on Bhushan Steel’s projected receivables, started
facing non-performing assets (NPA) concerns, especially after the company defaulted on
multiple payments. Eventually, Bhushan Steel’s financial health deteriorated to the point where
lenders initiated legal action under India’s Insolvency and Bankruptcy Code (IBC) in 2017. This
led to one of the most significant corporate resolutions in Indian history, with Tata Steel
acquiring Bhushan Steel in 2018, ensuring the continuation of operations and saving
thousands of jobs. The case of Bhushan Steel highlights the critical importance of managing
post-shipment finance effectively, assessing the creditworthiness of buyers, securing
payments through instruments like letters of credit (LC), and mitigating risks associated
with global market fluctuations. It also underscores how poor financial planning, heavy
reliance on bank financing, and delays in international payments can create a crisis that
eventually leads to bankruptcy. The role of banks in monitoring post-shipment credit and
ensuring responsible lending also comes into question, as they must evaluate the financial
health of exporters before advancing funds. The acquisition by Tata Steel ultimately helped
stabilize the business, but the case serves as a cautionary tale for companies that depend too
heavily on post-shipment finance without adequate safeguards.
Discussion Questions:
1. How did Bhushan Steel’s reliance on post-shipment finance contribute to its financial
crisis?
2. What were the risks of using bill discounting as a post-shipment finance method?
3. Could Bhushan Steel have protected itself from delayed payments? If so, how?
4. What role do banks play in ensuring that exporters manage their post-shipment finance
responsibly?
5. How did the acquisition by Tata Steel help in resolving Bhushan Steel’s financial crisis?
