Tata Steel on Friday said its wholly-owned subsidiary Bamnipal Steel Limited (BNPL) had completed the acquisition of a controlling stake of 72.65 per cent in Bhushan Steel, making it the first of the 12 Reserve Bank of India-recommended NPA cases to be resolved under the Insolvency and Bankruptcy Code (IBC).
The government lost no time in celebrating its success. Piyush Goyal, who has been given the temporary charge of the finance ministry, tweeted: “Congrats to PM @narendramodi ji & @arunjaitley ji for a historic breakthrough in resolving legacy issues of banks. Lenders recovered almost entire principal loan of Bhushan Steel through Rs 36,400 cr (Rs 364 billion) transparent bid by Tata Steel and also got 12% stake in the company.”
He also said the liquidation value of Bhushan Steel was Rs 145.41 billion but creditors received almost four times the amount. This was possible due to a “robust and transparent” IBC, he added.
Financial Services Secretary Rajiv Kumar said it was a historic day as banks recovered Rs 325 billion from the sale of Bhushan Steel to the Tatas under the IBC. Banks would gain from the writeback, he said, adding that 53 lenders, domestic and international, had recovered Rs 352 billion.
Bhushan Steel will add 5.6 million tonnes (mt) of crude steel capacity to Tata Steel’s existing 12.7 mt. The company has downstream facilities of cold rolled products of around 2 mt. The upstream facilities are in Meramandali (Odisha) and downstream in Khopoli (Maharashtra) and Sahibabad (Uttar Pradesh). Bhushan mainly caters to the automobile and consumer durables manufacturers.
The shares were subscribed by Tata Steel through primary subscription, which has been done at the face of Rs 2 a share.
The admitted cost and employee dues have been paid and the settlement of the amount equivalent to Rs 325 billion towards financial creditors of Bhushan Steel was being undertaken as per the terms of the resolution plan and corresponding transaction documents, the company informed the stock exchanges.
The firm also said Rs 12 billion would be paid to the operational creditors of Bhushan Steel over a period of 12 months as per their admitted claims and as per the terms of the approved resolution plan.
The investment from BNPL in Bhushan Steel has been done through a combination equity of Rs 1.58 billion and inter-corporate loan of Rs 349.73 billion. Additionally, Rs 1 billion has been paid by BNPL to the financial creditors of Bhushan Steel as consideration for the remaining financial debt.
Pursuant to the acquisition, the nominees of BNPL have been appointed on the board of Bhushan Steel and the existing directors of Bhushan Steel are deemed to have resigned from its board as per the terms of the approved resolution plan, Tata Steel said.
THE FINE PRINT
Investment from BNPL in Bhushan Steel has been done through a combination equity of Rs 1.58 bn and inter-corporate loan of Rs 349.73 bn
Fifty-three lenders — domestic and international — have recovered almost the entire principal loan of Rs 364 bn
Lenders have also got a 12 per cent stake in Bhushan Steel