Appoint an administrator for Electrosteel Steels, says NCLT
KOLKATA: The Kolkata bench of the National Company Law Tribunal (NCLT) on Friday ordered the appointment of an interim resolution professional (IRP), or administrator, to take control of the assets and operations of Electrosteel Steels Ltd on a plea by State Bank of India (SBI).
The company is one of the 12 stressed accounts that the Reserve Bank of India asked lenders to refer for bankruptcy proceedings. SBI had moved NCLT on July 10.
Electrosteel Steels representatives did not appear in the NCLT when the matter was mentioned in the court first on July 10. A key company official said the management had decided not to oppose SBI’s application. The person asked not to be named.
The bench gave Electrosteel Steels another opportunity to defend itself but on July 18, Sachchida Nand Pandey, a lawyer appearing for the company, said he had no instruction to oppose the application.
On Friday, the bench ordered the appointment of an IRP, effectively superseding the board and imposing a moratorium for 180 days on “any action to foreclose, recover or enforce security interest” under the newly introduced Insolvency and Bankruptcy Code.
SBI’s counsel Rishav Banerjee submitted that the company is one of the biggest defaulters in the country—it owed ₹14,000 crore in all and ₹1,404 crore to SBI alone.
But the company official cited above said Electrosteel Steels owed ₹9,600 crore to lenders and a “couple of hundred crore more to non-financial creditors”. The matter will be taken up by NCLT on August 2 when IRP will submit its first report to the bench.
The Electrosteel Steels management blames the failed debt restructuring plan in September 2013 for the company’s current woes.
The official cited above said lenders had agreed to extend a fresh loan of ₹1,300 crore to rescue the company, but in the end Electrosteel Steels did not get this credit line.
In fiscal year 2017, Electrosteel Steels’ loss jumped to ₹1,463.48 crore from ₹368 crore in the previous year. In the year ended March 31, the company’s revenue slipped marginally to ₹2,867.82 crore from ₹2,904.47 crore in the previous year.
In FY17, the company’s finance cost alone was ₹1,129.83 crore compared to ₹526.63 crore in the previous year.
Founded 11 years ago, Electrosteel Steels was intended to run a 2.5 million tonne integrated steel plant in Bokaro district of Jharkhand. The company went public in September 2010. At that time, UK-based steel trading firm Stemcor Global Holdings Ltd had a substantial stake in the company.