Insolvency issues: Lenders pick Dalmia Bharat for Binani Cement

Lenders have chosen a consortium led by Dalmia Bharat to take over Binani Cement, despite a close bid by the Aditya Birla group’s UltraTech.

 
Dalmia had offered Rs 63.5 billion for Binani Cement, while UltraTech's financial offer was a tad lower. The lenders’ meeting was held in Mumbai on Tuesday.

 
This will be the first case under the Insolvency and Bankruptcy Code, 2016, where banks will not have to take a haircut on their loans.

A source close to the development said UltraTech had offered a 20 per cent stake to non-secured financial creditors. But the lenders decided to go with Dalmia, which offered more upfront money.

Binani Cement had defaulted on debt of Rs 39.76 billion in 2016-2017. The case was sent to the National Company Law Tribunal (NCLT) by Bank of Baroda for debt resolution last July. An UltraTech spokesperson declined to comment.

Dalmia pipped five bidders — UltraTech, JSW Cement, HeidelbergCement, stockbroker Rakesh Jhunjhunwala and Ramco Cements.

     At A Glance

  • Dalmia had offered Rs 63.5 billion for Binani Cement
  • The other bidders were UltraTech, JSW Cement, HeidelbergCement, Rakesh Jhunjhunwala and Ramco Cements
  • Binani Cement had defaulted on debt of Rs 39.76 billion in 2016-2017
  • This will be the first case under the IBC where banks will not have to take a haircut on their loans

The NCLT will have to ratify the final selection of the winner. The tribunal is expected to hear the case on March 1 in Kolkata. Dalmia Bharat, backed by Bain Capital and Piramal group, is the fourth-largest cement company in India, with a capacity of 25 million tonnes per annum. According to its annual report, when the Indian cement industry output declined 1 per cent, the company grew volumes 20 per cent in 2016-17.  Dalmia Bharat reported a cash profit of Rs 13.11 billion in 2016-2017. Its gross revenues were Rs 83.48 billion, increasing 15 per cent from Rs 72.62 billion in 2015-16. 

Binani Cement has a manufacturing capacity of 11 million tonnes per annum, with plants in China and Dubai.

Binani Industries, the promoter of Binani Cement, has pegged Dalmia Cement’s valuation at Rs 173 billion, including mining rights of Rs 117 billion, as compared to Dalmia Bharat’s valuation of Rs 63.5 billion. It said the company defaulted on loans after an adverse Supreme Court judgment that increased its tax outgo. The NCLT will hear Binani’s petition on March 1.