Anil Agarwal-owned metals and mining giant, Vedanta's resolution plan for the debt-laden Electrosteel Steels has been accepted by the National Company Law Tribunal, making it the first of the 12 large stressed accounts to be resolved under the Insolvency and Bankruptcy Code (IBC).
In June 2017, the Reserve Bank of India had identified 12 large accounts, which accounted for a quarter of the total bad loans in the system, for resolution under the IBC. Electrosteel Steels, which owed lenders over Rs 10,000 crore, was one of them.
Vedanta was the highest bidder, offering around Rs 5,000 crore for Electrosteel Steels. That means, lenders will have to take a haircut of about 50 per cent. Tata Steel had also been among the bidders for the company, although its bid was reportedly lower than that of Vedanta.
The Committee of Creditors (CoC) led by State Bank of India had approved Vedanta's bid for Electrosteel Steels last month. Abhishek Dalmia-led Renaissance Steel had moved the Kolkata bench of the National Company Law Tribunal (NCLT) arguing that both Vedanta and Tata Steel were ineligible to bid under Section 29A of the IBC, due to past punishable offences. However, those contentions were rejected.
“...approving the resolution plan of corporate debtor Electrosteel Steels, which is approved by the CoC with a voting share of 100 per cent under section 31(1) of the Insolvency and Bankruptcy Code, 2016, which will be binding on the corporate debtor, its employees, members, creditors, coordinators and other stakeholders involved in the resolution plan,” the NCLT order read.
Anil Agarwal, the chairman of Vedanta Resources was pleased that the decision had finally been done.
“Extremely happy with the decision on Electrosteel. We look forward to adding value, creating more jobs and being part of the development of Jharkhand,” Anil Agarwal, the executive chairman of Vedanta Resources tweeted.
Electrosteel's assets in Jharkhand will complement well with Vedanta's iron ore mine in the region, thus making raw material easily available.
Electrosteel is setting up a 2.5 million steel plant in eastern India. In a TV interview on Tuesday, Agarwal said that a “couple of hundred crore” were required to complete the project and “money will not come in the way.”
Vedanta Ltd shares closed 0.3 per cent lower at Rs 289.65 on the BSE. The company has said that the closure of the deal will be subject to compliance with acceptable regulatory requirements and as per the final terms approved by the NCLT.
Apart from Electrosteel Steels, the first list of 12 accounts referred by RBI for insolvency resolution included Bhushan Steel, Essar Steel, Jaypee Infra, Alok Industries, Monnet Ispat, Lanco Infra, ABG Shipyard and Jyoti Structures among others. Several of these cases are in advanced stages of resolution under the IBC.
The second list of stressed accounts released by RBI for NPA resolution in December 2017 includes 28 companies.
Under the IBC guidelines, once admitted, a resolution must be completed in 270 days.
