“It is only fair that the shares are locked in till the loan is paid. Otherwise the resolution proposed by the investor may be in jeopardy,” said another source.
A lock-in period could affect plans of private equity (PE) firms that are bidding for struggling companies
in order to turn them around and sell them later at a profit. “If a PE firm wants to induct an equity partner, it will be difficult,” said a bidder.
The clause will not affect other bidders like JSW Steel, Vedanta and ArcelorMittal because they plan to remain invested for a long time.
JSW Steel has tied up with Japanese steel major JFE and the Piramal group to bid for Bhushan Steel. It is also bidding alone for Bhushan Power and has won the race to acquire Monnet Ispat.
Cash-rich Vedanta has won the race to buy Electrosteel Steels and is bidding for both the Bhushan assets.
Some bidders are worried about the change in rules mid-way. “Every day something new is coming up, which is confusing. Today media reports said lenders would negotiate only with the highest bidder and this was not there earlier,” said Seshagiri Rao, joint managing director of JSW Steel.
Over 4,300 insolvency cases have been filed, of which 470 have been admitted to the National Company Law Tribunal. But the buyer interest is concentrated on steel and cement companies, which have large capacities across India.
With inputs from Aditi Divekar