Electrosteel Steels Ltd is not going to oppose the appointment of an administrator as State Bank of India (SBI), the principal lender, on Monday moved the Kolkata bench of the National Company Law Tribunal (NCLT) to recover its dues under the newly introduced Insolvency and Bankruptcy Code.
Asked why Electrosteel Steels did not attend Monday’s hearing when SBI moved its application for admission, a key company official said the management had decided not to oppose the lender’s move to take control of assets and operations. This person asked not to be identified.
SBI said in its application with the NCLT that it wanted management consultant PwC to be appointed as interim resolution professional. Though SBI’s application was not opposed, the bench did not pass any order on Monday. The bench is expected to pass its order within a few days, according to Souvik Mazumdar, one of SBI’s lawyers.
Under the insolvency code, the interim resolution professional is expected to take control of the borrower’s assets and manage its operations, constitute a committee of creditors and take stock of all claims before handing control of the company to a resolution professional appointed by the creditors’ committee.
SBI’s counsel Rishav Banerjee said Electrosteel Steels is one of the biggest defaulters in the country with a total outstanding of around Rs14,000 crore, but the unnamed official cited above said the company owed financial institutions only around Rs9,600 crore and a “couple of hundred crore more” to other creditors.
Electrosteel Steels is one of the 12 stressed accounts identified by the Reserve Bank of India to be “accorded priority by the NCLT”.
Banerjee presented at Monday’s hearing a letter from the company from last month, in which it has admitted that it had failed to repay its loans for over two years from April 2015. Lenders had tried to rescue the company by offering a fresh loan under a restructuring package. The company still couldn’t turn the corner, SBI’s lawyers said at the NCLT.
They were referring to the debt restructuring plan finalized in September 2013, under which lenders had agreed to make a fresh loan of Rs1,300 crore but it didn’t work because the company couldn’t, in the end, borrow the money, said the unnamed company official cited above. Because of the failed debt restructuring plan, the company ran aground, he claimed.
Kolkata-based manufacturer of ductile iron pipes Electrosteel Castings Ltd is the promoter of the embattled steel company. It currently owns 45.23% in Electrosteel Steels. The book value of the stake on Electrosteel Castings’ books was Rs1,110.77 crore, according to the annual report for 2016.
In fiscal 2016-17, the company’s loss widened to Rs1,463.48 crore from Rs368 crore in the previous year. In the year ended 31 March, the company clocked a revenue of Rs2,867.82 crore versus Rs2,904.47 crore in the previous year. In 2016-17, the company’s finance cost alone was Rs1,129.83 crore compared with Rs526.63 crore in the previous year.
Founded in 2006, Electrosteel Steels was intended to run a 2.5 million tonne integrated steel plant in Bokaro district of Jharkhand. The company went public in September 2010. At that time, UK-based steel trading company Stemcor Global Holdings Ltd had a substantial stake in the company.