First off the block: Resolution process kicks off for Monnet

Buyers to submit expression of interest by Sept 25; JSW Steel likely contender

The resolution process for Monnet Ispat and Energy has begun, with an invitation of expressions of interest from potential investors. Investors have till September 25 to submit expression of interest (EoIs) for a resolution plan, according to the advertisement put out for that purpose. 

Monnet has become the first to initiate the process among the five steel companies that are going through insolvency resolution under a directive of the Reserve Bank of India (RBI). The other companies are Essar Steel, Bhushan Steel, Bhushan Power and Steel and Electrosteel Steels. 

Among the likely contenders for Monnet is JSW Steel, which had emerged as the sole bidder in the last round of bidding when lenders had invoked strategic debt restructuring. That deal did not go through because the lenders found the haircut implicit in the offer too steep. 

Monnet was one of the first companies where lenders converted 53 per cent of their debt into equity.

Before the last round of bidding, the Sudhir Maheshwari-led Synergy Capital Corp and private equity fund Blackstone had submitted proposals to lenders.

However, the proposals submitted before the insolvency process began are not relevant anymore and interested parties will have to bid afresh.

Sources said JSW could face competition. Private equity players and strategic investors from the steel sector have been taking an interest in Monnet since the insolvency process began. Also, Sandeep Jajodia, promoter of Monnet, is likely to submit a resolution plan backed by private equity funds.

But the final bidding process is still some way off. The EoIs will be shortlisted and the selected parties will be provided further information for submission of their resolution plans. The request for proposal will be issued to applicants qualified by the resolution professional and they will be required to submit their resolution plans within stipulated timelines along with the bid bond. The winning bid will be selected from the final bids and then the final resolution plan will have to be submitted to the National Company Law Tribunal (NCLT).

The process will have to be completed in 180 days and under special circumstances an additional 90 days can be granted. If a time-bound resolution does not emerge by then, Monnet will go into liquidation.

Monnet owns a 1.5 million tonne integrated steel plant along with a 0.8 million tonne sponge iron plant, a 2 million tonne pellet plant, a 0.96 million tonne sinter plant and a 230 MW captive power plant in Chhattisgarh. The company also owns 7.5 million tonnes coal beneficiation facilities in Chhattisgarh and Odisha.

Monnet’s troubles started when the Supreme Court deallocated 214 coal blocks in 2014. Monnet had five coal mines and was the country’s second-largest coal-based sponge iron producer. Monnet transformed itself into a steelmaker by commissioning a plant in Raigarh in 2013-14. The operating mine close to Raigarh provided the coal. That supply was disrupted when the coal blocks were cancelled.

According to the eligibility criteria set forth, the networth for a public or private limited company, NBFC or body corporate must be Rs 500 crore. In case of financial institutions or PE investors the minimum asset under management must be Rs 2,000 crore in the immediately preceding completed financial year or committed funds available for investment or deployment in Indian assets must be Rs 1,000 crore or more in the immediately completed financial year.