Bankers cheer as Tata pays for Bhushan acquisition

The first major resolution of an insolvency case filed with the National Company Law Tribunal has brought cheer to bankers, with Tata Steel confirming on Friday that it had completed the acquisition of 72.7% stake in Bhushan Steel (BSL) and that it was in the process of paying the lenders ₹35,200 crore.

“Settlement of the amounts equivalent to ₹35,200 crore towards financial creditors of BSL is being undertaken as per the terms of the resolution plan,” Tata Steel said in an exchange filing. “₹1,200 crore will be paid to the operational creditors of BSL over a period of 12 months as per their admitted claims and as per the terms of the approved Resolution Plan.”

Banks have already received 65-70% of the amount, as per the terms of conditions of the resolution plan, bankers said on condition of anonymity.

With most banks having already made provisions for 50% of the total ₹56,000 crore BSL owed them, proceeds from the sale are seen boosting profitability. BSL had topped a list of 12 debtors that the Reserve Bank of India (RBI) had asked banks to initiate insolvency proceedings against.

“However, some banks that had identified Bhushan as non-performing at a later stage and had not yet made 50% provisioning, they will not stand to gain much from the first payment,” said a CEO of a public sector bank. RBI has directed banks to make 50% provisioning against outstanding loans in the case of accounts that are referred for resolution under the bankruptcy code.

Bankers said they expect some more resolution to be completed in the current quarter which will further boost their profitability.