UltraTech takes fight for Binani Cement to NCLT after bid rejection

There was no transparency over how the bids were evaluated and why the UltraTech bid was rejected, said source

The Aditya Birla group’s UltraTech Cement moved the National Company Law Tribunal (NCLT) in Kolkata on Tuesday against the resolution professional for Binani Cement after its bid for the cement company undergoing insolvency proceedings was rejected. 

The Kumar Mangalam Birla company had earlier served a notice to the resolution professional asking for details on the weight given to its bid as compared to the winning bid by a consortium consisting of Dalmia Bharat and Bain Capital’s India Resurgent Fund and Piramal Enterprises.

A source close to UltraTech told Business Standard that barring a single-line email that its bid was rejected, UltraTech did not receive any communication from the resolution professional. “There was no transparency over how the bids were evaluated and why the UltraTech bid was rejected,” the source said. 

Binani Cement’s insolvency resolution was conducted by Vijaykumar Iyer, partner, Deloitte, after Bank of Baroda moved the NCLT. This was after Binani Cement failed to repay its debt worth Rs 39.7 billion last July. 

Binani Cement has a production capacity of 11 million tonnes per annum and had received bids from Dalmia-Bain, UltraTech, Ramco Cement, Heidelberg, stockbroker Rakesh Jhunjhunwala and JSW Cement. 

JSW Cement was the winner in the first round, but the resolution professional had decided to call for rebids.

According to a source, UltraTech and other bidders had been informed of the weight that would be given to various parameters. These parameters included the company’s background, experience and upfront cash to be paid to the secured lenders. 

While Dalmia offered Rs 63 billion, UltraTech’s offer was Rs 1 billion less. Dalmia’s offer was to settle with only one unsecured lender, IDBI Bank, UltraTech offered a 30 per cent haircut to all unsecured lenders.

Both bids offered zero haircut to secured lenders, making it one of the rare cases where banks are not taking losses on bad loans. “UltraTech’s offer was Rs 1 billion less, but that could have been matched with the Dalmia offer. Besides the Dalmia offer does not take care of over 3,000 unsecured creditors and small suppliers, while UltraTech offered to take care of all suppliers,” said the source. He added that the Insolvency and Bankruptcy Code was clear that the resolution plan should take care of all stakeholders, and not only key lenders. 

“We have a good credit rating, apart from more cash in our reserves to service the debt. But there was no communication by the resolution professional on this,” said an insider asking not to be named. “We want to know on what basis we were scored by the resolution professional,” he said.

An email sent to the resolution professional did not elicit any response. “As a matter of policy, we do not comment on client confidential matters,” said a Deloitte executive. The Dalmia Bharat spokesperson said at present the company was not commenting on the Binani Cement acquisition. 

The source said there were reports that UltraTech’s bid was rejected as it had been fined by the Competition Commission of India in the past along with other cement majors. “But there have been similar cases against the winning bid in the Northeast, which were allowed,” said the source.

Binani Industries, the promoter of Binani Cement, has also moved the NCLT, Kolkata, on the insolvency process of the cement company by pegging its valuation at Rs 173 billion, including mining rights of Rs 117 billion, as compared to the valuation of around Rs 63 billion received from Dalmia Bharat. Binani Industries said the company defaulted on its loans after an adverse Supreme Court judgment which increased its tax outgo. Binani also alleged that the resolution professional had a “personal interest” in undervaluing the company so that it could be given to their “favourite company”. The Binani petition will be heard by the NCLT on March 13.