Vedanta gets NCLT nod for Electrosteel takeover
Kolkata: The NCLT on Wednesday approved the resolution plan submitted by Vedanta Ltd for Electrosteel Steels, making it first among the 12 large stressed accounts identified by RBI last year to get resolved under the Insolvency and Bankruptcy Code.
The National Company Law Tribunal (NCLT) in an order said the "resolution plan of corporate debtor Electrosteel Steels Ltd which is approved by the CoC with a voting share of 100 per cent under section 31 (1) of the Insolvency & Bankruptcy Code 2016" has been approved.
The approved resolution plan will come into force with immediate effect, according to the order. The 270-day resolution deadline as stipulated by the Insolvency and Bankruptcy Code, ended on Wednesday.
According to sources, the resolution plan involved close to Rs 5,300 crore cash payout and a haircut of 60 per cent of the total banks' debt. Electrosteel Steels owes lenders more than Rs 13,000 crore, of which about Rs 5,000 crore to State Bank of India alone.
"Lenders will get a stake in the company close to around five per cent and Vedanta will also infuse a fresh capital of Rs 500-700 crore in form of equity as part of their turnaround plan," sources said.
Vedanta in a statement said "one of its wholly-owned subsidiaries will subscribe to the share capital of Electrosteel for an aggregate amount of Rs 1,805 crore ($275.7 million) and provide additional funds aggregating to Rs 3,515 crore ($536.9 million) by way of debt".
"Upon implementation of the Resolution Plan, the Company will hold approximately 90 per cent of the paid up share capital of Electrosteel," it said.
The remaining 10 per cent stake will be held by Electrosteel's existing shareholders and financial creditors, it added.
"The funds recaived by Electrosteel as debt and equity will be used to fully settle the debts owed to the existing financial creditors of Electrosteel, by payment of Rs 5,320 crore ($812.6 million)," the company said.
Renaissance Steel, one of the resolution applicants for Electrosteel Steels, had contested that Vedanta and Tatas were not eligible to bid as per Section 29A of the Insolvency and Bankruptcy Code. The eligibility test was crucial for Vedanta as the same could have an impact on other stressed assets like Essar Steel in which the group is one of the contenders.a