Vedanta leads Electrosteel race with highest offer

Anil Agarwal’s VedantaBSE -0.22 % submitted the highest bid for bankrupt Electrosteel SteelsBSE 4.98 %, ahead of a Tata Group bid, said two people aware of the matter. The other bidders were Renaissance Group promoted by Abhishek Dalmia and an overseas fund backed by Edelweiss, they said.

The Vedanta bid was said to be worth about Rs 4,500 crore, although one person said it may include an additional “sweetener”, without providing further details. The Tata bid was said to be worth about Rs 3,500 crore. ET was unable to ascertain the offers made by the other two parties.

The process is being run in accordance with the Insolvency and Bankruptcy Code (IBC), PwC said in an email without elaborating. Dhaivat Anjaria of PwC is the resolution professional in charge of the Electrosteel insolvency process. Vedanta and Tata didn’t respond to queries. The Vedanta and Tata bids are all-cash offers, said the people cited above.

Electrosteel faces claims of around Rs 10,000 crore from financial creditors, rising to Rs 13,000 crore if interest and penalties are added. If these are excluded, Vedanta’s offer implies a haircut of 55% for lenders while the Tata bid would mean one of 65% based on the afore-mentioned figures. A haircut is the amount a lender has to forgo to settle a loan. SBI is the lead bank and had referred Electrosteel to NCLT in July last year at the direction of RBI.

The committee of creditors is to meet on Wednesday to consider the resolution plans of the four bidders and decide the next course of action. While the Tata Group has a steel business, the other bidders don’t.

To be sure, Vedanta has a sprawling iron ore business and a successful bid would see its entry into steelmaking. Lenders will base their assessments on defined parameters.

The qualitative ones will include the practicality of financial projections, the bidder’s ability to turn around distressed companies and financial track record. The quantitative parameters include upfront cash recovery as per the resolution plan, net present value factoring in upfront cash recovery, equity upside and fresh equity infusion for improving operations.

Electrosteel is among the 12 companies that RBI had asked banks in June to immediately refer to bankruptcy court.

Lenders had earlier attempted to revive Electrosteel under the strategic debt restructuring scheme that entails a part of the debt being converted into equity and sold to strategic investors. However, a deal to sell the company to First International was called off due to concerns that this would lead to the promoters, the Kejriwals, regaining control.

Electrosteel Casting, also promoted by the Kejriwals, currently has a 45% stake in Electrosteel Steels while the rest is held by the public.