BHUSHAN STEEL
In May this year, Delhi based Bhushan Steel, which has plants in Maharashtra, Odisha and Uttar Pradesh, had bagged an iron-ore mine in Odisha in an aggressive auction. It beat sectoral giants Tata Steel and JSW. The bullish posturing revived hopes of investors but was not enough to win bankers, who dragged them to the Delhi bench of NCLT this month.
The Bhushan group founded by first generation entrepreneur Brij Bhushan Singal started as a manufacturer of door hinges in the 1970s. Over four decades under Singal, who is now non-executive chairman, Bhushan Steel created a steel capacity of 5.6 million tonnes per annum. Younger son Neeraj manages the company as its vice-chairman and managing director. Bhushan Steel’s bad times started in 2012 when coal mines were cancelled by the Supreme Court. Slump in steel prices followed. “Dumping of steel from China and cancellation of mines were other reasons,” says Nitin Johari, Director (Finance) at Bhushan Steel. Over the years, debt rose steadily to `40,000 crore while it added capacity. The company struggled to repay loans. The bribery allegation against the promoters came up in August 2014 and the Central Bureau of Investigation arrested vice-chairman Neeraj Singhal for allegedly bribing Syndicate Bank chairman S K Jain, among others.
Over the last two years bankers and the company studied various restructuring proposals from the 5/25 Scheme for refinancing the loan to the Scheme of Sustainabale Structuring of Stressed Assets (S4A). The S4A scheme allows converting unsustainable debt into equity or equity related instruments while treating sustainable debt as standard asset in the books of lending banks. There is no relaxation in either interest rates or repayment of loan. Bhushan
OVER THE LAST TWO YEARS, BANKERS AND THE COMPANY STUDIED VARIOUS RESTRUCTURING PROPOSALS
Steel’s lawyer had said at the NCLT that the company’s restructuring plan under S4A was at an advanced stage of approval. He argued for a reprieve from bankruptcy proceedings. Some bankers are not very keen on S4A, instead they are insisting on deep restructuring.
“The S4A kind of a restructuring would dilute promoters’ holding, which is around 58 per cent. Given market capitalization of just `1,400 crore against a debt of `40,000 crore, the equity expansion under S4A does not make sense,” says a banker. There is a need for deep restructuring. But the joker in the pack could be Sajjan Jindal owned JSW which is keen to bid, provided the price is right.