The State Bank of India (SBI) on Thursday took beleaguered steel company Bhushan Steel to the National Company Law Tribunal (NCLT) in Delhi. Its sister company, Bhushan Power, has also been taken to the NCLT’s Delhi bench by the public sector Punjab National Bank (PNB).
Both the petitions have been filed under the Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, where the financial creditor initiates insolvency proceedings with a claim.
The hearings were adjourned till July 19. Bhushan Steel, the biggest stressed asset, has pleaded for corporate insolvency resolution process to be initiated.
Bhushan Steel has a liability of around Rs 43,000 crore towards more than 20 banks. While the chunk of term lending was by SBI, the working capital loan had been extended by PNB. Bhushan Power has a liability of around Rs 37,000 crore towards a number of banks.
Bhushan Steel and Bhushan Power are two of the 12 firms whose names were recommended by the Reserve Bank of India (RBI) for initiation of corporate restructuring through the insolvency route. It had even received approval from 60 per cent of the member banks, amounting to 75 per cent of loan value for the scheme, in the joint lending forum.
The company tried to restructure itself through the sustainable structuring of stressed assets (S4A) route earlier this year. According to RBI’s S4A scheme, banks are required to establish through a forensic audit that there was no malfeasance on the part of the promoter. If the audit finds anything adverse, S4A cannot be implemented unless there is a change in ownership or management is not vested with the delinquent promoters.
Bhushan Steel is the third-largest secondary steel producer in the country with 5.6 million tonnes (mt) of secondary steel capacity. In 2016-17, the company saw better sales buoyed by exports. Its gross sales were Rs 4,000 crore for the quarter ended December 31, 2016, against Rs 2,747.68 crore during the same period in 2015-16.