Bhushan Steel to seek approval for $1 bn QIP ahead of lenders meet

Written by Shayan Ghosh | Mumbai | Updated: Aug 14 2014, 06:51am hrs
Even as the consortium of lenders to Bhushan Steel readies to meet early next week to try and ensure the R40,000-crore exposure doesnt turn bad, the company said it will seek shareholder approval to raise $1 billion via securities.

As reported earlier by FE, bankers had loaned the company an additional Rs 6,900 crore in April, else the loan might have become a non-performing asset (NPA). State Bank of India (SBI) chairman Arundhati Bhattacharya had said last week the consortium was hoping to rope in a management agency to oversee the day-to-day running of the unit.

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The firm, which has three plants, in Odisha, Maharashtra and Uttar Pradesh, has been faring poorly, reporting a net loss of R141.63 crore for the three months to June. Operating profit came in at R715 crore while interest charges were R552 crore.

Bhushan Steel has been in the news over the role of its vice-chairman and managing director Neeraj Singal in an alleged case of bribery involving Syndicate Bank. The CBI last week arrested Singal after the special court issued a non-bailable warrant.

Singal holds a 32.30% stake in the firm while chairman Brij Bhushan Singal owns 20.15%.

Nittin Johari, director (finance) at the company, told FE the details of the fund-raising were yet to be worked out but added that it could look at a qualified institutional placement (QIP). We will have details on the fund-raising only after the shareholders' approval at the AGM on September 20 but QIP is an option, Johari said.

Banking sources say the account is classified in the Special Mention Account or SMA category where the interest is overdue by 0-30 days. The loan sanctioned in April was approved at a joint lenders forum (JLF) where lead banks SBI and Punjab National Bank were present. Bloomberg data show the firm had R31,754 crore of net debt in FY14; company data say the debt was R35,142 crore.

For the year to March 2014, the company reported an operating profit of R2,690 crore and a net profit of R59 crore on net revenues of R9,276 crore. The companys finance costs jumped 29% to R1,663 crore from R1,287 crore in FY13. Its market capitalisation has more than halved to R3,826 crore from R10,265 crore in February.