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NCLT okays Electrosteel's Resolution plan

April 19, 2018 12:01·
NCLT approves Vedanta's resolution plan for Electrosteel

NCLT approves Vedanta's resolution plan for Electrosteel

The Anil Agarwal-led Vedanta informed the stock exchanges that it has been declared the "successful resolution applicant" under the insolvency process and has received the Letter of Intent.

"The funds received by steel maker as debt and equity will be used to fully settle the debts owed to the existing financial creditors of, by payment of Rs 5,320 crore (US$ 812.6 million)", it said. "Vedanta had emerged the highest bidder after quoting Rs 4,500 crore for the steelmaker", the report added.

The NCLT in an order said the "resolution plan of Electrosteel Steels which is approved by the CoC with a voting share of 100 per cent under section 31 (1) of the Insolvency & Bankruptcy Code 2016" has been approved. Tata Steel and Renaissance Steel were the two other bidders for Electrosteel.

Upon implementation of the resolution plan, the company will hold approximately 90% of the paid-up share capital of Electrosteel.

The company owes lenders more than Rs 13,000 crore ($2 billion), according to a Bloomberg Quint report. Tata Steel TISC.NS , privately-held Renaissance Steel and Edelweiss Alternative Asset Advisors Pte Ltd were the suitors for Electrosteel Steels.

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Renaissance Steel had claimed that Konkola Copper Mines, a unit of Vedanta Resources, had been convicted of flouting environmental laws in Zambia, an offence punishable with three years in jail, and hence ineligible to bid.

Kolkata: The NCLT on Tuesday approved the resolution plan submitted by Vedanta for Electrosteel Steels, making it first among the 12 large stressed accounts identified by the Reserve Bank in 2017 to get resolved under the Insolvency and Bankruptcy Code. According to Electrosteel's statement of audited financial results for the year ended 31 March 2017, the total income was ₹ 2,867.83 crores ($ 438.1 million) and loss ₹ 1,463.48 crore ($223.6 million).

The creditors had approved Vedanta's bid after a six-hour meeting on March 29, which was challenged by Renaissance Steel at the NCLT. As part of the resolution plan, Vedanta will subscribe for the share capital of Electrosteel for an amount of Rs1,805cr and Rs3,515cr by way of debt.

Electrosteel owns and operates a greenfield integrated steel manufacturing facility near Bokaro, Jharkhand, India, which has a capacity of 1.5mtpa.

Vedanta said the transaction will complement the group's existing iron ore business through vertical integration of steel manufacturing.

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