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Union Bank of India, one of the many lenders to Bhushan Steel, is not in favour of appointing an external agency to run the troubled steel maker.
“It (the crisis at Bhushan Steel) has not reached that level. One person has been taken into custody but large organisations are not run by one person. If the chairman of a bank retires, should the bank come to a halt?The answer is no. It (Bhushan Steel) is an institution and institutions are not run by an individual,” Arun Tiwari, chairman and managing director of the bank, said.
Bhushan Steel’s Vice-Chairman and Managing Director Neeraj Singal was arrested by the Central Bureau of Investigation (CBI) last month for allegedly offering a bribe to Sudhir Kumar Jain, the now suspended chairman and managing director of Syndicate Bank.
The steel company has borrowed close to Rs 40,000 crore from 35 lenders. While the loans are still classified as standard assets, the arrest has cast a shadow on the company's ability to repay its dues.
Banks have directed a forensic audit to find out whether the money borrowed was diverted and not used for the purpose for which it was given.
A recovery road map drawn by SBI Caps, the merchant banking arm of State Bank of India (SBI), has suggested that the troubled steel-maker should sell and lease back some of its critical assets to reduce debts. Suggestions were also made to appoint an external agency to run the company.
Tiwari, however, appeared optimistic. “If you see the assets on the ground – Rs 40,000 crore has some economic value. All the stakeholders, including employees of Bhushan Steel, have to be taken care of. The corrective action plan is already in place. Also, as on date, it (loans to Bhushan Steel)is still a performing asset,” he said. He did not quantify Union Bank’s loan exposure in Bhushan Steel.
Separately, Tiwari said the state-run lender plans to raise Rs 1,386 crore through a qualified institutional placement (QIP).
“We will wait for the right time and right price to raise the funds. We already have the shareholders' approval for this.”
Tiwari also said while the incidence of loans turning non-performing has reduced, there could be fresh slippages in coming quarters. “Incidence of NPAs (non-performing assets) has reduced but it does not mean you won't have NPAs. For that to happen, banks will have to lend only against fixed deposit receipts,” he said.
The bank has sold Rs 325 crore of bad loans to asset reconstruction companies in 2012-13 (April-March). Tiwari said while the bank plans to sell NPA accounts in the current financial year, it will only conclude a transaction if it gets an appropriate price for those assets.
