Banks jittery as JSW's Rs 19,700-cr offer for Bhushan Power awaits NCLT nod

JSW Steel’s cost for Bhushan Power and Steel’s acquisition has increased and at the same time banks awaiting payday from the stressed asset are feeling jittery as fresh litigation has hit the debt resolution of the company.

Sajjan Jindal-owned JSW Steel, which raised funds for making upfront payment to lenders for Bhushan Power acquisition, will have to incur additional cost as the money was raised as debt, warn company officials. Two weeks ago, JSW raised $500 million from overseas to fund the acquisition after declared as the highest bidder in March.

On April 23, the National Company Law Tribunal completed hearing arguments on JSW's offer to buy Bhushan Power and reserved the order. No date has been fixed yet for pronouncing the order by the NCLT. The NCLT hearing on April 23 came after an order from the Punjab and Haryana High Court on April 18 asking the tribunal to hear the promoters who claimed they have not received any details on the JSW offer. The promoters argued as they have only the redacted version of the resolution offer from the CoC, the entire process should start afresh.

Bhushan Power was in the first list of 12 companies identified by the Reserve Bank of India for debt resolution in June 2017. At that time, the company owed close to Rs 47,000 crore to the lenders. "We are not getting any dues from Bhushan Power since 2017 and have lost close to Rs 9,000 crore as interest income in the last two years. The delay is hurting the lenders as well as the bidder," said a member of the Committee of Creditors of Bhushan Steel asking not to be quoted.

The CoC had cleared JSW offer in March this year and banks were getting 41 per cent of their dues in the company from JSW Steel as upfront cash, taking a 59 per cent haircut. The haircut is the amount a bank foregoes to resolve its non-performing account.

According to JSW officials, the company has its own expansion plan coming up in Karnataka's Vijayanagar and may use the funds in the project if Bhushan Power debt resolution delays further.

Interestingly, as litigation over the company intensified, the CBI has issued Look Out Circulars against Bhushan Power and Steel Chairman Sanjay Singhal and his wife Aarti, who is the vice-chairman of the company, in connection with cheating in loans worth over Rs 2,348 crore, PTI reported on April 25.

The banker said in the case of Essar Steel, the operational creditors have received Rs 55,000 crore from the company in the last two years as the plant is in operation. But in the case of lenders, they have not received a single rupee back and are awaiting the resolution of the account. “It's a double whammy for us. An earlier resolution would have helped us to utilise the funds in other productive areas,” he said. The operational creditors of Essar Steel, led by Standard Chartered Bank have moved the courts seeking their dues. The NCLT has asked the CoC to offer 15 per cent of ArcelorMittal's upfront cash to operational creditors and the rest should be shares with lenders. The matter is pending.

The story so far

June 2017: Bhushan Power identified by the RBI for debt resolution

March 2019: Lenders committee selects JSW as highest bidder

April 2019: Promoters move HC seeking more details on JSW offer

April 2019: NCLT reserves order on JSW Steel offer