Binani acquisition: Resolution cost for takeover process exceeds Rs 1 bn

Currently, out of 11.25 mt per annum installed capacity, Binani Cement's plants are rolling out 0.24 mt of cement every month

As the battle for the acquisition of Binani Cement rages on, with around 14 petitions submitted by stakeholders at the National Company Law Tribunal’s (NCLT’s) Kolkata Bench, the resolution cost for the takeover process has exceeded Rs 1 billion.

Sources told Business Standard Rs 1.1 billion had been allotted for the takeover process. Of this, Edelweiss Asset Reconstruction Company (ARC), the largest lender to Binani Cement, has given a short-term loan of Rs 850 million while the rest of the funding for interim financing is being done from internal accruals. 

The resolution professional and other consultancy activities provided by Deloitte India are to the tune of Rs 100 million and legal expenses, supply, transportation, and other operational overheads make up for the rest of the cost.

Sources suggested Edelweiss ARC, which already had a loan exposure of almost Rs 40 billion after it took over bad loans from other banks, was charging an interest to the tune of 16 per cent on the interim financing loan.

“This interim financing is part of the resolution plan and will be repaid in full at a single go by the company that acquires Binani Cement,” a source said.

The Dalmia Bharat Cement-led consortium’s takeover plan has been approved by the Committee of Creditors and referred to the tribunal for its nod. Though the exact monetary value of this resolution plan is not known, it is estimated to be around Rs 65 billion.

However, a source close to Dalmia Bharat Cement claimed that out of the total interim financing loan sanctioned by Edelwiess ARC, not more than Rs 600 million has been used till now. Previously, a Rs 4 billion interim financing was suggested for the process, but the Committee of Creditors approved a Rs 1.1 billion package.

“We felt this amount was enough to meet the operational requirements until the company finds a buyer,” a lender said. As on date, Binani Cement’s total outstanding to financial lenders is around Rs 65 billion.

Asked about the proportion of finances lent to the bankrupt firm, the source said, “Without interim financing, it would not be possible for the company to carry out daily production. Most of the short-term loan is being used for manufacturing purposes, to pay the daily creditors, and meet other requirements."

Currently, out of 11.25 million tonne (mt) per annum installed capacity, Binani Cement's plants are rolling out 0.24 mt of cement every month. Another source said apart from resolution professional Vijay Kumar Iyer, another 20 people connected with this firm were advising the takeover.

Earlier, Braj Bhushandas Binani, director of Binani Cement's suspended board, had alleged the resolution professional had made “huge unreasonable payments” from the funds of Binani Cement with the consent of the Committee of Creditors. 

His legal counsel had filed a petition with the Kolkata bench of the tribunal, which after hearing the plea, had asked the resolution professional to respond to the allegation. 

The next hearing will be held on Tuesday.