Lenders take over mgmt control of Electrosteel Steels

SBI Caps to scout for buyer, in talks with Singapore-based steelmaker for takeover after talks with Tata Steel fall through

Following the Reserve Bank of India (RBI) allowing banks to take over management control of chronic defaulting companies, lenders have decided to put the Kolkata-based Electrosteel Steels on the block, after taking majority stake in the company. Banks have exposure of about Rs 10,000 crore to the steel producer.

In a stock market notification, Electrosteel Steels on Monday said at a meeting, the Joint Lenders Forum had taken an “in-principle” decision to invoke strategic debt restructuring (SDR), in line with the central bank’s guidelines on SDR, issued on June 8.



Last month, RBI had come out with SDR, a mechanism to deal with defaulting companies. Through these, lenders can partially or fully convert their loans to a majority stake in the company if it defaults even after its loans are restructured. SDR is invoked if the borrower is unable to achieve the viability milestones or adhere to the ‘critical conditions’ stipulated in the restructuring package.

“The details, as well as the development on the SDR package and the investment proposals, will be intimated in due course,” read the company’s notice to stock exchanges. State Bank of India, ICICI Bank and Axis Bank are some of the major lenders on the list of about two dozen financial institutions with exposure to the steel company.

The notice also said Electrosteel and its lenders would continue to explore the proposals of investment, as detailed in a letter dated June 11.

 

Umang Kejriwal, promoter of the company, could not be reached for comment.

On June 11, Electrosteel had informed exchanges that the lenders/company had received indicative term sheets for investment in the company from the Tata group and financial investors based in Singapore. “The bankers and the company are exploring the proposals of investment,” Electrosteel told exchanges.



Bankers said talks with the Indian steelmaker fell through, as lenders weren’t willing to offer a haircut. “We want our principal amount to be protected, at the least,” said a senior official from a public sector bank with exposure to Electrosteel. An email sent to Electrosteel remained unanswered till the time of going to print.

SBI Caps, which is to identify a buyer, has shortlisted a Singapore-based steelmaker. “The talks are in the final stages,” said the banker.

Promoters hold 45 per cent stake in Electrosteel Steels. Recently, Umang Kejriwal had told Business Standard the promoters weren’t averse to exiting the company if any of the prospective investors so decided.