The Delhi High Court on Tuesday stopped Srei Infrastructure Finance Ltd. from selling Orissa Slurry Pipeline Infrastructure Ltd. to Mauritius-based Numetal until April 15. The order was issued on a plea filed by State Bank of India Ltd., whose lawyer argued OSPIL cannot transfer stake without the lender’s approval.
Numetal Mauritius -- an SPV in which Essar Group’s promoter, the Ruia family, has an interest -- had earlier confirmed that it has entered into an agreement to purchase a controlling stake in Orissa Slurry Pipeline, a key pipeline which supplies raw material to Essar Steel’s Odisha plant.
The proposed bid for the pipeline had bankers seeing red. Particularly since recent amendments to the Insolvency and Bankruptcy Code bar defaulting promoters from bidding for their own assets until they clear overdue. The Ruia family has not done so yet and hence is not eligible to bid for Essar Steel.
OSPIL is responsible for transporting about half the raw material required for Essar Steel's iron pellet plant in Paradip, Odisha. The 253-kilometre pipeline is the cheapest way to bring in the raw material.
Whoever controls the pipeline, would have considerable influence over the plant's production capabilities and thereby on Essar Steel's ability to repay its debt.
Late evening Tuesday a Numetal spokesperson said in a comment that "We will be approaching all the existing lenders of OSPIL for their consent for the proposed purchase in due course. We are confident that lenders will be happy to have us as the controlling shareholder after they have understood our proposal. In the event that they are not comfortable, we are prepared to assist the company in refinancing any dissenting lenders, in which case their consent will no longer be required."
An earlier version of this story has been amended to include the Numetal spokesperson’s comment received later in the day.