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Binani Cement Lenders Not Impressed With UltraTech Side Deal With Promoter

Lenders not content with UltraTech’s latest bid for Binani Cement.

A view of Ultratech ready mix concrete plant (Photographer: Adam Ferguson/Bloomberg)
A view of Ultratech ready mix concrete plant (Photographer: Adam Ferguson/Bloomberg)

Lenders to Binani Cement Ltd. are not enthused with UltraTech Cement Ltd.’s latest bid, a banker with direct knowledge of the matter said.

The Birla group company would have to pay over Rs 8,000 crore – including admitted claims worth Rs 7,600 and interest accumulated since initiation of insolvency worth Rs 400 crore – to be considered for termination of the insolvency process, the banker quoted above said requesting anonymity.

The letter of comfort, which UltraTech has agreed to provide, will not be enough to drop the insolvency proceedings, the banker said. Moreover, the National Company Law Tribunal or the appellate tribunal do not have jurisdiction to drop a corporate insolvency resolution process against a company, and the case will be decided only in the Supreme Court, the banker said.

An emailed query sent to Edelweiss Asset Reconstruction Company, the largest lender in the consortium, didn’t elicit a response.

As per the terms of the agreement with Binani Industries notified earlier today, UltraTech will buy 98.43 percent stake in its cement unit for Rs 7,266 crore. The deal is subject to the termination of the insolvency process against Binani Cement. UltraTech had increased its offer for Binani Cement after Dalmia Bharat emerged as the highest bidder. The Committee of Creditors, however, on March 15 approved the rival bid by the investor group led by Dalmia Bharat and backed by Bain Capital. At present the resolution plan has been submitted to the Kolkata bench of the National Company Law Tribunal for approval.

In an interview with BloombergQuint, Sameer Kaji, adviser to Binani Industries said that the promoters believe the insolvency process was not done in a transparent manner. “We feel, under the code, we should have been invited to understand and evaluate those bids because we could’ve enhanced them and added value. Because of this we felt that we should look at other options.”

BloombergQuint’s calls and messages to Vijaykumar Iyer of Deloitte, the resolution professional appointed to the case, remained unanswered.

Promoters are seeking to terminate the corporate insolvency resolution process under Section 60(5) of the Insolvency and Bankruptcy Code. This section states that the NCLT can entertain or dispose of any application or proceeding by or against a corporate debtor or corporate person.

On March 22, the NCLT will hear all pleas in the Binani Cement insolvency matter. The banker quoted above said that the committee of creditors will decide on future course of action, after the tribunal’s order. Besides Edelweiss ARC, other financial creditors for Binani Cement include IDBI Bank and Bank of Baroda, among others. The claims for this section of creditors stand at nearly Rs 6,500 crore.