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The lenders of Electrosteel Steels Ltd (ESL) have initiated a move to convert a part of the company’s ₹9,600 crore borrowing into equity and pave way for management change over.
In a statement to the stock exchanges, the company said that the 27-bank lenders’ forum, led by SBI, opted for strategic debt restructuring for its outstanding loan account of ₹9,600 crore.
The Joint Lenders Forum “approved in principle the decision for invocation of strategic debt restructuring”, ESL said.
Sources told BusinessLine that this meant the ESL’s loan account would remain “standard” and not a non-performing asset, for the next 18-month period despite default in interest payment by the company in terms of the earlier approved CDR package.
Sources said that under the relevant RBI norms the banks now would have to prepare a fresh “package”, which has to be approved by the shareholders within a timeframe of another three months from the time of the package approval.
Conditional proposals Electrosteel defaulted paying interest on its borrowings a couple months ago. The company earlier had said that the bankers received two proposals – one from Tata Steel and another from a Singapore-based firm for takeover or for strategic support.
According to sources, both the proposals were conditional. Tata Steel in its offer is understood to have sought a reduction of the debt burden by over 50 per cent through write-offs, conversion of debt into equity and preference shares. Tata Steel also proposed banks to fund the cost of completion of the steel making project through additional lending.
ESL still requires around ₹1,600 crore more to complete its integrated steel making project at Bokaro in Jharkhand. In 2014-15, ESL incurred a net loss of ₹624 crore.
The Singapore-based fund’s offer included fresh investment of around ₹1,000 crore and a reduction of debt burden, including write-offs and conversion to under 20 per cent.
Though Umang Kejriwal-family controlled Electrosteel Casting Ltd owns 45.23 per cent in ESL, 79 per cent of the holdings is pledged with the lenders.
The steel maker is learnt to have offered to buyout the promoter’s stake at ₹2 a share, much lower price than the current market price of ₹3.53 on the BSE.
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