The Kolkata bench of the National Law Company Tribunal (NCLT) will hear State Bank of India’s (SBI) application to admit the case of insolvency proceedings against Electrosteel Steels Ltd, among the 12 cases identified by the Reserve Bank of India’s (RBI) advisory panel.
Electrosteel Steels owes more than Rs10,200 crore to SBI-led consortium of lenders.
It was the first company where lenders had converted debt into equity under the RBI’s strategic debt restructuring (SDR).
Electrosteel Steels was accepted in the corporate debt restructuring (CDR) cell for a recast of debt of over Rs6,100 crore in December 2013. However, the company exited the cell after failing to implement the CDR package in 2015.
Following this, lenders decided to invoke provisions of SDR, which allowed them to take charge of the management of the company by debt conversion.
In an exchange filing in December 2015, the company had informed that lenders had decided to convert part of debt worth over Rs2,500 crore into equity. Subsequently, lenders had sought interests from prospective buyers to offload their 51% stake in Electrosteel Steels.
Lenders had shortlisted Tata Steel and London-based financial investor First International Group Plc. for the proposed stake sale.
However, both the parties backed out from the race. In case of First International Group, lenders were not convinced about the credibility because of some of its previous dealing with Electrosteel Steels and steelmaker’s promoter Umang Kejriwal.
Further, Piramal Enterprises, led by Ajay Piramal, and the Renaissance Group, part of the Dalmia Group, were planning to bid for buying stake in Electrosteel Steel, according to a 28 December 2016 report of the Financial Express.
While there has been no development on the stake sale, banks have now moved to NCLT to start insolvency proceedings following the 13 June directive of the RBI to do so.
The RBI shortlisted 12 companies, with a combined debt of Rs2.5 trillion, and asked lenders to start insolvency proceedings to recover dues.
The RBI circular had stated that these cases will be accorded priority by NCLT.
So far, the tribunal has approved proceedings against power infrastructure company, Jyoti Structures Ltd, one among the 12 shortlisted.
Meanwhile, the Gujarat high court on Friday objected to the RBI saying that the NCLT would accord priority to bankruptcy proceedings it has recommended against Essar Steel Ltd and 11 other loan defaulters. The court was hearing a petition filed by Essar Steel against the central bank recommending the launch of bankruptcy proceedings against the company.
The matter has been adjourned until 12 July.
Subsequent to the court’s observation, the RBI on 8 July issued a corrigendum on the earlier circular by deleting the line which said that identified 12 cases will be accorded priority at NCLT.
Source: Mint