Ultratech offers ₹7,266 cr to acquire Binani Cement
FRESH TWIST Firm offers to pay on condition of terminating insolvency process
MUMBAI/KOLKATA: UltraTech Cement Ltd has upped the ante in its bid to acquire debt-laden Binani Cement Ltd by initiating talks with its parent Binani Industries Ltd outside the bankruptcy process.
This adds a fresh twist to Binani Cement’s resolution and will test the bankruptcy framework as courts will now to have to decide if a counter offer can be accepted after the creditor committee had declared a Dalmia Bharat-led consortium as the winning bidder.
Separately, on Monday, the Kolkata bench of National Company Law Tribunal (NCLT) allowed the resolution professional to file the resolution plan submitted by the Dalmia consortium, despite opposition from Ultratech and the Binani Group.
UltraTech Cement, India’s largest cement maker, informed the stock exchanges on Monday that it was willing to pay ₹7,266 crore to acquire Binani Industries’s 98.43% stake in its cement unit “subject to termination” of insolvency proceedings. UltraTech’s board also agreed to issue a letter of comfort to Binani Industries, committing ₹7,266 crore funding, as the Braj Binani-led firm seeks to stop insolvency proceedings of the cement unit.
According to legal experts, withdrawal of insolvency proceedings at the end of the resolution process could prove to be a difficult proposition as there is no clear procedure under law.
“While the creditors could potentially consider such debt payoff proposals by promoters in cases where no bids have been received, it will be a difficult proposition for the lenders to accept where a winning bidder has already been finalised, and the promoter proposal involves funding from the sale of the distressed asset to another bidder. Also, the withdrawal of post-admission insolvency petitions requires court approval,” Sudip Mahapatra, partner at S&R Associates, a Mumbai-based law firm.
UltraTech’s offer to Binani Industries came up after the cement maker challenged the sale of Binani Cement to Dalmia Bharat, alleging lack of transparency in the bidding process. It had complained to the NCLT and had also written to Binani Cement’s resolution professional offering to increase its bid to about ₹6,900 crore from about ₹6,200 crore earlier.
Vijaykumar Iyer of Deloitte Touche Tohmatsu India LLP is the resolution professional overseeing the bidding.
Despite the higher bid, lenders had questioned UltraTech about a past penalty of Rs 1,175.49 crore imposed by Competition Commission of India (CCI). This was part of an overall penalty of ₹6,700 crore on 11 cement companies, including UltraTech, ACC, Ambuja Cements Ltd, Ramco Cements Ltd and JK Cement Ltd, as well as industry body Cement Manufacturers Association for indulging in cartelisation.
On Wednesday, the committee of creditors approved Dalmia Bharat’s bid.
Creditors, however, are now of the view that if an out-of-court settlement is approved and secured creditors are paid in full, they will support the deal.
“If someone is covering up for the entire amount outstanding, we will be more than happy to consider the proposal. The proposal may need the blessings of the Supreme Court,” said an official from one of the creditors on condition of anonymity.
The resolution professional was on Monday allowed by the tribunal to file the resolution plan approved by the company’s creditors which has identified Dalmia Cement as the top bidder, despite opposition from Ultratech and the Binani Group.
“Despite opposition, the tribunal allowed the resolution plan approved by the committee of creditors to be filed,” said barrister Abhrajit Mitra, the legal counsel for the resolution professional.