India’s antitrust regulator today cleared UltraTech Cements Ltd.’s offer to buy stressed Binani Cement Ltd., but rival bidder Dalmia Bharat Ltd. says that won’t spoil its chances in the insolvency proceedings.
The clearance by the Competition Commission of India validates UltraTech's contention that they were “wrongly and unjustifiably” declared the second highest bidders instead of the winners, it said in a media statement. “A lot of apprehensions were raised by the resolution profession about UltraTech obtaining the CCI clearance, on its bid for Binani Cements,” the statement added.
India’s largest cement maker had earlier said that the absence of the competition commission’s approval was the reason it lost to Dalmia Bharat Ltd. in the bidding process.
India’s insolvency process faces a unique challenge. After Dalmia Bharat’s Rs 6,350 crore bid to buy Binani Cement’s assets was accepted by lenders, the second highest bidder UltraTech struck a parallel deal with Binani Industries to buy 98.4 percent stake in its cement arm for a much higher price of Rs 7,266 crore.
For that deal to go through, Binani Cement will need to exit the insolvency process. And that direction can only come from the Supreme Court. Now the committee of creditors will meet again over the weekend to take a call on the matter which is being seen as a test of India’s new bankruptcy law by many legal experts.
UltraTech had earlier told BloombergQuint that the resolution professional appointed to the case had subjectively decided that their bid would not get the CCI’s approval. That led to a lower rating for Ultratech on the qualitative parameters, Chief Financial Officer Atul Daga said. “And because of scoring us down our overall score fell short by 0.27 only on a scale of 100 from Dalmia Bharat's bid.”
Soon after UltraTech's announcement, Dalmia Bharat said CCI approval won’t prevent it from winning the bid for Binani Cement. “We state emphatically that the likelihood of obtaining the CCI approval by a bidder was not at all a criterion in bid evaluation,” it said in a statement. “The only criteria involving regulatory orders was whether any adverse regulatory order including an adverse CCI order imposing penalties had been passed against the bidder over the last 5 years.” UltraTech had faced regulatory action in 2016 when CCI imposed a Rs 1,175.5 crore penalty for cartelisation.
Speaking to BloombergQuint, Dalmia Bharat group chief Mahendra Singhi said, “No evidence has been cited to show that the CoC and its advisors did not make a correct assessment of bids.” It added that the reasons cited by UltraTech are misleading.
Dalmia Bharat made the highest financial bid and had also obtained the highest score in the evaluation.Mahendra Singhi, Group CEO, Dalmia Bharat
Singhi said the company is only waiting for an approval from the National Company Law Tribunal, which was inevitable as it had already signed valid contracts with the lenders. Lenders cannot decide to pick UltraTech in this deal because the IBC process doesn't allow an exit now, he added.