India’s dedicated bankruptcy resolution programme, which seeks to untangle billions of dollars stuck in bad loans, recorded its second-biggest successful recovery to date after global resources major VedantaNSE 0.12 % acquired management control of Electrosteel Steels Ltd (ESL) and named a new board to run the distressed steelmaker.
Vedanta has deposited Rs 5,320 crore in an escrow account of ESL for 90 per cent equity in the bankrupt alloy maker. This is the second successful resolution of a stressed steel asset after Tata Steel acquired Bhushan Steel.
The Anil Agarwal-owned company has nominated Rashmi Mohanty, P K Mukherjee (former Sesa Goa MD) and Naveen Singhal, who is currently CEO of Vedanta Sesa Goa Iron Ore, as its nominee directors on the reconstituted board of ESL.
Vedanta’s move followed the National Company Law Appellate Tribunal (NCLAT) order on May 30: It allowed Vedanta to acquire ESL by depositing the upfront payment to the Committee of Creditors (CoC). ESL has outstanding dues of Rs 14,177.3 crore. According to the resolution plan, Vedanta Star Limited (VSL), a wholly owned subsidiary of Vedanta, will take 90 per cent stake in ESL. Investment from VSL in ESL will come as a combination of Rs 1,765 crore as equity and Rs 3,555 crore as inter corporate loans.
A two-member NCLAT bench also said on May 30 that this payment would be subject to the outcome of the petition filed by Renaissance Steel, which has questioned Vedanta’s eligibility to bid for ESL. The bench also said that if Renaissance Steel wins the case, the CoC will have to return the money to Vedanta.
Vedanta didn’t want to comment on the course of action in case of an adverse verdict. “It is difficult to address this issue at this point in time. We’re following the NCLAT order given on May 30,” a Vedanta official said.
The appellate tribunal reserved its order on Renaissance Steel’s petition challenging Vedanta’s bid for the debt-laden ESL. Earlier, the resolution application filed by Renaissance Steel was rejected by ESL’s CoC.
In a notification to the exchanges on Monday, Vedanta said all requisite approvals like those from National Company Law Tribunal (NCLT) and Competition Commission of India have been received.ESL has a greenfield steel plant located at Siyaljhori in Jharkhand’s Bokaro district. It is currently being operated at around 1.5 million tonne per annum (mtpa). However, it has the potential to go up to 2.5 mtpa.
ESL had a total income of Rs 2,867.83 crore in FY2017. In a statement issued on Monday, Vedanta said the acquisition “will complement the company’s existing iron ore business as the vertical integration of steel manufacturing capabilities has the potential to generate significant efficiencies.”
The bankruptcy process began in July last year. In its order on April 17, NCLT approved the resolution plan submitted by Vedanta for acquiring a controlling stake in ESL.
Source: The Economic Times
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