CORPORATE HUNTERS
The number of companies that have been referred to the National Company Law Tribunal for resolution under the Insolvency and Bankruptcy Code (IBC) has crossed 400. A great many of these are small and medium companies that are most likely to go into liquidation. However, all the attention is on the big 12 companies that have been taken to the Tribunal by the banks after being nudged by the Reserve Bank of India. (See The Dangerous Dozen, BT, August 13, 2017).
These 12 companies accounted for an estimated 25 per cent of the total non-performing assets (NPAs) of roughly ` 8 lakh crore in the banking system. Though they defaulted on their loans, the market consensus is that most of them have good assets and the businesses ran into trouble because of policy issues, extraneous factors or bad management. And many of them can become profitable and thriving businesses if the debt problem is taken care of.
A number of big industrialists and investors, both domestic and global, are looking at the assets of these 12 companies very closely. They are hoping to pick up these assets and companies at a bargain, because banks will probably agree to take big haircuts just to clean up their books. The bargain hunters include companies like JSW, ArcelorMittal, Tata Steel, Ajay Piramal, the Shapoorji Pallonji Group among others.
The steel assets – Essar Steel, Bhushan Steel, Electrosteel Steels, Monnet Ispat and Bhushan Power and Steel – are generating a lot of interest because steel prices are rising once again, and players like JSW and ArcelorMittal are hoping to add capacity at a fraction of the cost it would have taken to build greenfield plants.
But even the other distressed assets like ABG Shipyards and Amtek Auto are getting a fair amount of interest.
Till even a month ago, existing promoters were expected to bid the hardest to retain their companies and businesses. But the new ordinance issued by the government all but makes it impossible for them to be part of the bidding process. Some are trying to get around the ordinance by paying up the overdue amounts, but whether that will allow them to become bidders once again is a grey area, say, most law firms. Much will depend on how the government sees it and how the courts interpret the clauses of the ordinance.
Our cover story this issue looks at the companies and groups hoping to pick up the distressed assets at bargain basement prices.
This issue also carries a corporate story on how Tata Motors is trying to get out of its troubles and a policy story on India’s hardening stance towards Chinese products and investors. We also have the sector report on pharma and health care where we look at the trends and issues.