He clarified that the promoters responsible for overdue loans must face some restraint from taking over their companies.
Promoters whose companies
have had their loans classified as non-performing assets by lenders for over a year are barred from bidding for them during insolvency proceedings.
An Essar group spokesperson declined to comment on the issue. The Ruias had earlier tied up with Russian VTB Capital to place a joint bid for Essar Steel. The company, undergoing insolvency proceedings with debts of Rs 372.8 billion, has drawn interest from other Tata Steel and ArcelorMittal.
Essar Steel is among 12 companies
with large overdue loans referred by the Reserve Bank of India in June to the National Company Law Tribunal for insolvency resolution. Promoters of the defaulting companies were planning to submit insolvency resolution plans till an Ordinance was promulgated in November, making them ineligible.
The Insolvency and Bankruptcy Code (Amendment) Bill clarifies issues thrown up by the Ordinance. Promoters will have 30 days to make their loan accounts operational. Also overdues have been defined in the Bill.
The committee of creditors that had earlier fixed January 29 as the last date for a non-binding bid for Essar Steel has sought an extension.
Essar Steel had paid about Rs 35 billion to banks between April 2016 and June 2017, and its unpaid interest is expected to be low. The Essar group reduced its debts by Rs 700 billion through the sale of its Gujarat-based oil refinery to Russia’s Rosneft.
Other steel companies undergoing insolvency proceedings must pay much more than Essar Steel to have their loan accounts made operational because interest is the biggest chunk of the amount due. For Bhushan Steel, the interest due is likely to be Rs 50 billion, for Bhushan Power & Steel Rs 80 billion and for Electrosteel Steels Rs 15 billion. Bhushan Steel and Electrosteel Steels are unlikely to consider paying the amounts in order to submit bids.
“There is no certainty that the promoter will be able to re-acquire the company. It is difficult to open a dialogue with investors for the amount that is required to be paid just to make oneself eligible,” said a source.
Bhushan Power & Steel’s promoter, Sanjay Singal, had earlier said he would make the payment if possible. Singal was not available for comment, but sources said there was no indication from his side that a resolution plan was in the works.