Kolkata-based non-banking finance company (NBFC), Srei, has submitted an expression of interest (EOI) to acquire Electrosteel Steels, currently undergoing the insolvency process under the Insolvency and Bankruptcy Code, as recommended by the Reserve Bank of India (RBI).
Srei is one of the around six companies - the others being Tata Steel, Mesco Steel, Edelweiss, Avalokiteshvar Valinv Limited and Electrosteel Castings - that have expressed interest in the steel firm.
A Tata Steel spokesperson said, "As a process, we do assess and evaluate various strategic opportunities for growth. This is an ongoing process in the company.
Srei, which has an exposure of around Rs 300-400 crore, has proposed to bring in a technical advisor to run the company.
"We have submitted an EOI for Electrosteel Steels. As a lender to the company, we look to protect the interest of all other lenders and ensure that the company is running. We don't have the expertise to run a steel firm, so we will introduce a technical partner to run the company at a suitable point of time," Hemant Kanoria, chairman of SREI Infrastructure Finance, told Business Standard.
Last year, Srei had opposed management change at Electrosteel under the strategic debt restructuring (SDR) mechanism, as it was in favour of the existing promoter running the company. Electrosteel was the first company in which lenders had invoked the SDR mechanism. During the SDR process, two firms-- London-based fund house First International Group Plc and Tata Steel -- had emerged as the foremost bidders for the company.
"We had earlier taken a stand that there was no reason that existing promoter should be removed because the problems in the company were sector-specific. We are always in favour of the present promoter running the company. However, now the circumstances have changed and we have to evaluate the best option. The committee of creditors will take a call on whether they want a new promoter or will continue with the existing one," said Kanoria.
Electrosteel Steels has a debt of about Rs 10,274 crore from a consortium of banks, led by SBI. It is one of the 12 NPA accounts identified by RBI in June under insolvency bankruptcy code for admission in NCLT.
"The difference between Srei and other lenders is that we are not only looking recover the money, but also providing a holistic solution to successfully run the company," added Kanoria. Earlier, in case of Hyderabad-based Deccan Chronicle too, in which promoters had defaulted on payments, Srei had initiated the process to take control of the company.
Srei is one of the few financial institutions which that have expressed interest in acquiring a debt-ridden company under the NCLT. A number of stumbling blocks had made Electrosteel Steels go haywire. Delay in project commissioning had increased the project cost by 20 per cent.
Banks had supported the company largely due to the raw material linkages. Electrosteel Steels was promoted by Electrosteel Castings, which had already secured Parbatpur coalmine having reserves of 231 mt. Plus, it had an iron ore mine and a non-coking coal mine in Jharkhand. Electrosteel Steels was to source iron ore and coking coal from Electrosteel Castings for a period of 20 years. But, then, the coal blocks of Electrosteel Castings were de-allocated in 2014 and Electrosteel Steels had to buy raw material at high prices from the market while finished product prices crashed.