UltraTech Cement gets a second chance to takeover Binani Cement

On account of an order from the Kolkata bench of NCLT, extending the timeline to consider an out-of-court settlement, the Aditya Birla Group controlled UltraTech Cement has got its second chance to take control and possession of Binani Cement, whose resolution methodology under the IBC proceedings is turning out to be one of the hotly contested stressed asset sales.

On Monday, a panel of two-member judges extended the deadline for the Committee of Creditors (CoC) of the bankrupt Binani Cement till April 9 to consider a proposal mooted by the very promoters of this bankrupt cement maker which can potentially override the agreement CoC has made with Dalmia Bharat Cement led consortium.

"We will be submitting our proposal to the CoC in a day or two. As an assurance that once the case is taken out of the court and then settled, we are also offering the CoC a 100 per cent bank guarantee to prove our intent that we will repay all the logical and legitimate lenders", Sameer Kaji, senior advisor to Binani Cement told Business Standard.

Binani Cement has proposed to pay back all the secured and unsecured financial creditors and trade operational creditors besides clearing all statutory dues fully on the condition that IBC proceedings against it have to be terminated.

Interestingly, the plan offered by Binani Cement follows from its agreement with UltraTech Cement under which the latter has agreed to pay the former Rs. 72.66 billion to take 98.47 per cent stake in Binani Cement directly from the promoters. It is based on this agreement and a subsequent letter that Binani Cement moved NCLT with its own proposal.

Although by that time, the CoC had issued a letter of intent to Dalmia Bharat Cement led consortium, which emerged as the H1 bidder and applied to NCLT for the final nod, Jinan K. R., member judge at Kolkata NCLT suggested that in the "larger interest of all the creditors, a harmonious settlement which has come up for consideration can always be looked into".

Sources close to Binani Cement suggest that in case the CoC consents to the out-of-court settlement offer from Binani Cement and terminates IBC proceedings against the defaulter, UltraTech Cement will be financing the entire money needed this settlement with the creditors. In this process, the Aditya Birla Group company will subsequently take control of Binani Cement as well.

During the bids for Binani Cement, UltraTech Cement lost out to the Dalmia Bharat Cement led consortium and came as a runner-up. Although it raised its bid later, the CoC had already selected Dalmia Bharat Cement led consortium as the H1 bidder and passed its proposal with 99.5 per cent vote. Thereafter, UltraTech Cement negotiated a deal directly with Binani Cement for a direct takeover.

Earlier, despite Jinan suggesting an out-of-court settlement, the lenders had declined to hold any meeting suggesting that there was no directive or order from the Tribunal. On Monday, when the two-member judges' bench asked the CoC's legal counsel the outcome of its previous suggestion for an out-of-court settlement, the lawyer reverted, "A meeting was called but they wanted to see the order (of the Tribunal) and then it was deferred".

The judge's order and observations were not uploaded on the official website of NCLT till Monday morning.

In turn, Jinan ordered that the outcome of the proceedings on March 27 (when the out-of-court settlement was suggested) be uploaded on the official website immediately and suggested the CoC to consider an out-of-court settlement. The lenders will have to revert back with their decision on April 9.

The CoC's legal counsel, after the proceedings, clarified that all statements made by the judge are to be considered as orders and directives.

Although initially, the creditors to Binani Cement had indicated they would like to honour the IBC procedure, lenders also indicated they cannot overrule any observations, suggestions or orders passed by the Tribunal. A date of meeting, however, is yet to be concluded.

While Kaji opined that an out-of-court settlement or a termination of IBC proceedings against a bankrupt company can be done, Mahendra Singhi, group CEO at Dalmia Bharat Cement is of the view that once IBC proceedings against any defaulter is initiated, the matter cannot be resolved out of IBC's purview.