A worker guides the steel reinforcing frame of a precast concrete tunnel segment being maneuvered by crane to a mold at a casting yard in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Edelweiss, Piramal And Tata Steel To Submit Resolution Plans For Electrosteel Steels

Edelweiss Asset Reconstruction Company (ARC) Ltd., the Piramal Group and Tata Steel Ltd. are likely to submit final resolution plans for Electrosteel Steels Ltd., three people close to the development told BloombergQuint.

The Kolkata-based steel maker was admitted for resolution under the Insolvency and Bankruptcy Code (IBC) earlier this year after the Reserve Bank of India (RBI) asked lenders to refer 12 large stressed accounts for insolvency proceedings. As per the rules, the appointed resolution professional for Electrosteel Steels, Dhaivat Anjaria, had invited expressions of interest (EOIs) by October 9. Final resolution plans are to be submitted by December, which will then be evaluated by the Committee of Creditors.

According to the people quoted above, while a number of potential suitors had expressed interest initially, many have exited during the due diligence process. Edelwiess ARC, Piramal Group and Tata Steel have stuck around and intend to submit a final plan. The Piramal Group is likely to bid through a stressed asset fund which it has set up with Bain Capital, the people quoted above confirmed.

Edelweiss ARC and the Piramal Group declined to comment on the story. Tata Steel and Anjaria did not respond to emails sent to them. Under the insolvency and bankruptcy process, the board at Electrosteel Steels has been suspended and the resolution professional has taken charge of operations till a resolution plan is finalised.

Electrosteel Steels owed Rs 13,159.70 crore to its financial creditors as of October, details available on the company’s website showed. State Bank of India (SBI) has the largest exposure to the company with dues of nearly Rs 5,000 crore. The company owes operational creditors Rs 191.62 crore, the resolution professional has acknowledged.

The company has been through two cycles of restructuring, first under the corporate debt restructuring (CDR) scheme and then under the strategic debt restructuring (SDR) scheme.

The steel maker was the first company in which lenders had invoked SDR, after the scheme was introduced in June 2015. Lenders had agreed to convert debt into equity and hold a majority stake in the company. However, the plan fell through after potential buyers, including Tata Steel, backed out due to a difference of opinion on valuations.

Subsequently, Electrosteel Steels was included in the list of 12 large NPAs which banks were asked to resolve under the IBC.

A number of these 12 companies fall have attracted strong investor interest.

In the case of Essar Steel, apart from interest from domestic steel companies like Tata Steel and Steel Authority of India Ltd, international investors like ArcelroMittal, Vedanta PLC and Nippon-Sumitomo Steel have shown interest, BloombergQuint reported last month quoting banking sources. Jaypee Infratech has attracted EOIs from 20 entities including Sajjan Jindal-led JSW Group, Vedanta PLC and Lodha Developers, reported PTI on November 11.

A larger number of bidders for stressed assets may allow banks to recover a larger part of their dues. However, the jury is still out on the kind of recovery that banks will see through the insolvency process, said Ashish Gupta, head of research at Credit Suisse in an interview with BloombergQuint on Monday. Gupta cautioned that the process may get dragged out if promoters decide to challenge the decisions taken by the resolution professionals and the creditors committee.

At the end of the June quarter, listed banks reported gross NPAs worth over Rs 8 lakh crore. Reported bad loans have more than doubled over the past two years after the RBI conducted an asset quality review and pushed banks to recognize stressed assets appropriately.