Led by State Bank of Patiala, lenders to Monnet Ispat and Energy (MIEL) have sought bids to sell up to a 51% equity stake in the company. The bank has mandated SBI Capital Markets to look for buyers, a bid document showed.
In November last year, lenders to MIEL had decided to convert Rs 368 crore of debt into equity at Rs 34.20 per share under the Reserve Bank of India’s (RBI) strategic debt restructuring (SDR) scheme.
While it was not possible to ascertain at what valuation banks are willing to part with the shares, according to Bloomberg the enterprise value of the company stood at Rs 8,247 crore in FY15, thereby valuing a 51% stake at Rs 4,205 crore. Monnet’s market capitalisation on Wednesday stood at R486 crore.
Bloomberg data showed that the firm’s gross debt at the end of March 2015 was R7,985 crore, up from Rs 6,849 crore at the end of March 2014.
According to the document, the debt on balance sheet of MIEL may be refinanced based on a proposal submitted by the prospective investors.
The funds infused — by way of equity and fresh loans — will be utilised towards “improving the capital structure, improving business profile of the company and ramping up production”.
Lenders, the document said, plan to divest their stake along with management control. However, in a regulatory disclosure last year in November, the company had said that management control “will remain with the existing management”.
In FY15, the New Delhi-based firm had posted a net loss of Rs 796 crore on the back of Rs 3,212 crore in revenues with interest expenses more than doubling to Rs 653 crore. In Q3FY16, it reported a net loss of Rs 479 crore on revenues of Rs 343 crore.
MIEL has an integrated steel plant of 1.5 million tonnes per annum along with associated facilities including 0.80 mtpa sponge iron, a 2 mtpa pellet plant, 0.95 mtpa sinter plant and a 230 MW captive power plant in Chhattisgarh along with 7.5 mtpa coal beneficiation facilities in Chhattisgarh and Odisha.
Following the SDR guidelines put out by the RBI in June last year, bankers have decided to try out a restructuring for a handful companies including Electrosteel Steels, Jyoti Structures, Lanco Teesta Hydro Power, Monnet Ispat, Coastal Projects, Visa Steel, Gammon India and IVRCL, among others.
Following the SDR, 29 banks and financial institutions own 50.12% of the company. Headed by Sandeep Jajodia as its chairman and managing director, the company is promoted by Udhyam Merchandise (12.51%), Sudha Jajodia (0.62%), Sandeep Jajodia (0.55%) and Nikunj Jajodia (1.34%).
An SDR allows conversion of debt at a price below the current market value or the average of closing prices during the 10 trading days before the joint lenders’ forum (JLF) decision. They can now own at least 51% of the equity of the company and have up to 18 months to look for a new buyer.
The bid document added that expressions of interest should come from investors or consortium of investors having adequate financial and technical capability as acceptable to the lenders.
