Insolvency: UltraTech keeps options open for Binani Cement takeover

UltraTech Cement is keeping its options open regarding Binani Cement’s stressed assets, on other than the legal insolvency process.

This is despite it becoming the new H1 bidder under the law’s framework, replacing the Dalmia Bharat-led consortium, for a takeover.

The Aditya Birla Group company has deposited Rs 6.52 billion with the lenders, sources told Business Standard. This was after the Committee of Creditors (CoC) to the insolvent entity had issued it a Letter of Intent (LoI). Yet, noted the sources, it had previously financed the directors of Binani Cement when they sought an out-of-court settlement with the lenders.

Based on recommendations of the Kolkata bench of the National Company Law Tribunal (NCLT), the directors of Binani negotiated a deal with the lenders, promising to pay back fully with interest as on date. The leading lenders asked Binani to deposit a bank guarantee, to prove the commitment. Based on this, UltraTech, financially backing this deal for an over 98 per cent stake takeover, deposited Rs 7.5 bn with the lenders.

However, the deal finally didn’t materialise. However, this Rs 7.5-bn guarantee, paid from UltraTech’s coffers, is still with the lenders. And, the CoC of Binani is yet to decide what to do with that amount.

Some sources suggest it will be returned to UltraTech. Others think it might be adjusted against the final payment UltraTech needs to make before concluding a takeover.

Another source, a member of the CoC, opines that as long as the amount remains with the lenders, given to them as a bank guarantee for termination of the proceedings against Binani under the Insolvency and Bankruptcy Code (IBC), this option remained open. “Unless the lenders return this money or clearly state what to do with it, the option for an out-of-court settlement remains open,” this source said.

Stakeholders involved in the Binani takeover story say that given the still evolving uncertainties over the IBC, and the legalities in this case, UltraTech might wish to keep open all options.

Previously, the lenders had selected the Dalmia Bharat-led consortium as the highest and successful bidder. And, went to NCLT for approval of the plan. After several stakeholders challenged it, the tribunal ordered the Resolution Professional (RP) in this case and the CoC to consider UltraTech’s plan.

“Nobody knows for sure where it will head to and what will be the final outcome. It is evident that the matter will be finally resolved in the Supreme Court. But, till then, UltraTech will be keeping various routes open for acquiring Binani Cement,” says a source from among the lenders.

This lender had previously felt Binani Cement’s proposal was superior and excellent but had asked the entity to get permission from the Supreme Court (SC) before it could accept the out-of-court proposal. Although the hitherto bankrupt company filed an application with the SC, it then pulled out the appeal before a verdict could be passed.

A source opposing Dalmia Bharat’s takeover opined that since no verdict had been given by the SC, this option remained open. “Under the current situation, this proposal might be the last resort if UltraTech or Binani Cement sees the case turning against it, in favour of Dalmia Bharat,” a source opined.

On the other hand, Dalmia Bharat has contended that once a process starts under the IBC, it cannot be stopped. Hence, an out-of-court settlement is not legally viable.

On the other hand, from proceedings at the National Company Law Appellate Tribunal (NCLAT), various stakeholders say they believe its observations to be in line with the order of NCLT in UltraTech’s favour. 

However, the appellate tribunal, while considering an appeal from the company’s RP, said: “One of the questions that arise for consideration in this appeal is whether the adjudicating authority (NCLT) has a right to decide on misconduct of an RP while entertaining an application under Section 60(5) of the IBC.” The RP had appealed to the NCLAT against some observations of the NCLT against him.

Some stakeholders view this as a lever whereby NCLT’s order could be overturned by the appellate body.

Slab by slab
  • UltraTech paid Rs 6.52 bn to the lenders after they issued it Letter of Intent
  • Previously, it paid the lenders Rs 7.5 bn via Binani Cement as bank guarantee for 98% stakeholding
  • CoC yet to decide what happens to that Rs 7.5 bn
  • Implies that out-of-court settlement option remains open


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