had bid for Electrosteel Steels — Vedanta, Tata Steel, Edelweiss and Renaissance Steel India. The bids are being evaluated by McKinsey.
Recently, Hemant Kanoria, chairman and managing director of Srei Infrastructure Finance, had said that two years ago he had presented the institutions and the promoter with a plan where the lenders would have realised at least Rs 60 billion.
Srei is a creditor in Electrosteel Steels.
Two years ago, the steel sector was in a much worse condition with an onslaught of cheap imports from China. However, globally and in India, demand has picked up, reflected in successive increase in prices.
Electrosteel Steels has a debt of about Rs 102.88 billion from a consortium of banks. A number of stumbling blocks had tripped the company, such as delay in commissioning, which increased the project cost by 20 per cent.
Electrosteel has a planned steel-making capacity of 2.51 million tonnes and a commissioned capacity of 1.5 million tonnes. Banks had supported the firm largely due to raw material linkages. Electrosteel Steels was promoted by Electrosteel Castings, which had secured Parbatpur coal mines, having a reserve of 231 million tonnes.
Plus, it had an iron ore mine and a non-coking coal mine in Jharkhand. Electrosteel Steels was to source iron ore and coking coal from Electrosteel Castings for a period of 20 years.
But the coal blocks of Electrosteel Castings were de-allocated in 2014, forcing Electrosteel Steels to buy raw materials from the market at high prices, even as prices for the product witnessed a crash.
Electrosteel was one of the first companies
for which lenders had applied strategic debt restructuring when the RBI came up with the mechanism to tackle bad loans. Incidentally, Tata Steel was one of the front-runners when the company was initially put on the block.