Vedanta resolution plan for Electrosteel gets apporoval from NCLT

CHENNAI: National Company Law Tribunal (NCLT), Kolkata Bench, has cleared the decks for Vedanta Ltd. to acquire Electrosteel Steels Limited by approving the resolution plan submitted by it.

This is the first case of NPA (non-performing assets) which has reached the final resolution out the 12 accounts referred by the Reserve Bank of India to NCLT.

Besides Vedanta, Tata Steel, privately-held Renaissance Steel and Edelweiss Alternative Asset Advisors Pte. Ltd. were also in race for Electrosteel Steels.

In line with the resolution plan, a wholly-owned subsidiary of the Vedanta will subscribe to the share capital of Electrosteel for an aggregate amount of ₹ 1,805 crore ($ 275.7 million) and provide additional funds aggregating of ₹ 3,515 crore ($ 536.9 million) by way of debt.

Upon implementation of the resolution plan, the company will hold approximately 90% of the paid-up share capital of Electrosteel. The remaining will be held by Electrosteel's existing shareholders and the financial creditors who receive shares in exchange for the debt owed to them.

The funds received 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 ₹ 5,320 crores ($ 812.6 million).

Electrosteel was incorporated in Ranchi as a public company on December 20, 2006, and has been listed on the BSE and NSE since 2010. Electrosteel owns and operates a greenfield integrated steel manufacturing facility near Bokaro, which has a capacity of 1.5 million tonnes per annum (MTPA) and the potential to increase to 2.5 MTPA.

Electrosteel’s unaudited statement of assets and liabilities as at 30 September 2017 reports the total assets of Electrosteel as ₹ 13,051.56 crore ($ 1,993.7 million). According to Electrosteel’s statement of audited financial results for the year ended 31 March 2017, the total income was ₹ 2,867.83 crores ($ 438.1 million) and loss ₹ 1,463.48 crore ($223.6 million). Its latest unaudited quarterly update for the nine months ended 31 December 2017 reported a total income of ₹ 2,440.35 crore ( 372.8 million) with a loss of ₹ 866.50 crores ($ 132.4 million). Total Income for the year ended 31 March 2015 and 31 March 2016 was ₹ 1,846.85 crore ($ 282.1 million) and ₹ 2,904.47 crore ($ 443.7 million), respectively.

``The directors of the company believe that the transaction will complement the group’s existing iron ore business as the vertical integration of steel manufacturing capabilities has the potential to generate significant efficiencies. The directors do not expect the transaction will have any material impact on the group’s earnings for the financial year ending 31 March 2019 and anticipate returns to be received in the following years,’’ said a release from Vedanda.

``The consideration payable under the resolution plan and the transaction fees and expenses will be paid using the existing cash resources,’’ the release added.

``As part of the transaction, the company has submitted an unconditional and irrevocable performance guarantee of ₹ 100 crore ($15.3 million) to the committee of creditors which shall be released upon expiry of six months from the date that the National Company Law Tribunal approved the resolution plan,’’ the release added.