A man smokes a cigarette in front of the Essar Group corporate offices in Mumbai. (Photographer: Prashanth Vishwanathan/Bloomberg)

Lenders Seek To Extend Deadline For Essar Steel Resolution Plans

Domestic lenders are looking to extend the deadline for submission of final resolution plans in the case of Essar Steel Ltd., according to two people familiar with the matter.

Additional time is needed both for potential bidders to complete due diligence and for existing promoters to reassess their plans in light of recent amendments to the Insolvency and Bankruptcy Code, the two people said.

An insolvency petition against Essar Steel was admitted by the Ahmedabad bench of the National Company Law Tribunal on Aug. 2. The IBC lays down a 180-day timeline within which a resolution plan has to be finalised. This can be extended by a maximum of 90 days.

The Committee of Creditors had approved an extension of the timeline and will now approach the NCLT for permission, said the first person quoted above. The person added that the amendments to the IBC have necessitated the extension in timeline.

On Nov. 22, the President promulgated an ordinance introducing provisions to the IBC, which effectively barred promoters of large defaulting firms from participating in the bidding process. As per the amendments, those whose accounts have been non-performing for a year and are unable to settle their overdue amounts will not be allowed to participate in the resolution plan.

Essar Steel’s promoters are still weighing their options, said the first person quoted above while adding that it is tough to say at this stage whether they would challenge the ordinance or clear their overdues in order to participate in the resolution process. On Dec. 5, Business Standard reported that Essar Steel’s promoters are looking to clear their overdues to become eligible to bid. BloombergQuint could not independently confirm this.

An email sent to spokespeople of the Essar Group on Thursday morning remained unanswered. Satish Kumar Gupta declined to comment.

Satish Kumar Gupta, the resolution professional in Essar Steel, had sought expressions of interest for the company by Oct. 23.

On Oct. 24, BloombergQuint reported that ArcelorMittal, Sumitomo Corporation, Vedanta Resources Plc, Tata Steel Ltd. and Steel Authority of India Ltd. have submitted expressions of interest for a resolution plan. The Ruias, who are the promoters of Essar Steel, had also shown interest, BloombergQuint reported citing people familiar with the matter. Typically, formal resolution plans are sought within 4-6 weeks of the EoIs being submitted.

Essar Steel is among the 12 large cases that were referred for insolvency proceedings in June at the direction of the Reserve Bank of India. These 12 cases make up nearly 25 percent of the bad loans in the banking system, which stood at Rs 8.4 lakh crore at the end of September.