Tata Steel has announced the completion of its acquisition of Bhushan Steel, even as it continues to fight a legal battle with the financially-troubled company's original promoter. India's second-largest private sector metal producer, it has paid £3.52 billion to the creditors of Bhushan Steel for a 73 per cent stake in the company, in what is seen as the conclusion of the first among a dozen high-profile cases that are being pushed for resolution under the new Insolvency & Bankruptcy Code (IBC).
The statement came even as Bhushan Steel's erstwhile owner Neeraj Singal has challenged the deal at the appellate tribunal and has sought a stay on the transfer of his 22 per cent stake in the company. The matter is up for hearing on May 21. The completion of the acquisition puts the Singals out of the saddle from a company that had acquired the image of a perpetual loan defaulter that put up plants at a cost that was higher than the industry average. The deal immediately prompted the Indian government to celebrate. With cases ranging from Essar Steel and Bhushan Steel and Power to Binani Cement and Jaypee Associates are being fought across judicial forums, the government expects the successful resolution of Bhushan Steel to speed up a decision in other cases too.
Financial Services Secretary Rajeev Kumar tweeted, “Fifty-three lenders, domestic and international, recover £3.52 billion under IBC- 76 per cent of the outstanding bad debt. The whole process completed in 270 days from admission in NCLT. Creditors to also get upside from a 12 per cent equity stake now in strong hands.” Piyush Goyal, who is officiating as finance minister, said that compared to the liquidation value of £1.45 billion, the lenders had managed to realise a much higher value. “For the first time, such a large loan resolution has been achieved through upfront payment received by banks through sale of a company.”
He added, “This is a record step towards resolving the legacy of unprecedented amount of bad bank loans inherited by this government.” Goyal credited Prime Minister Narendra Modi and Jaitley for the insolvency resolution plan. He added that lower NPAs will make loans more affordable, especially for MSMEs.
