The Baosteel Group from China is likely to have a bigger stake in Visa Steel if a deal between the two goes through. Baosteel plans to acquire a 26% stake in a new entity formed by the merger of a joint venture between Visa Steel and itself with Visa Steel, bankers told FE. Visa, which owes lenders Rs 3,800 crore, has sought time till June to close the deal. Vishal Agarwal, vice-chairman and managing director of Visa Steel, could not be reached for comment.
Baosteel and Visa Steel have a JV — Visa Bao — in which Visa holds 65% while Bao holds 35%. Last year, Visa had received the approval of shareholders for a merger of the JV with Visa Steel; following the merger, which is awaiting a nod from the National Company Law Tribunal, Baosteel would have been left with 5% in the new entity.
However, Visa has informed lenders that instead of just 5%, Baosteel would now like to hold 26% in the new entity, sources said.
In FY16, Visa Steel reported a consolidated net loss of Rs 641.4 crore on revenues of Rs 1,303 crore after paying interest costs of Rs 475 crore. In the nine months to December 2016, the Kolkata-headquartered company reported a net loss of Rs 89.31 crore on revenues of Rs 882 crore, paying an interest of just Rs 15 crore.
At a meeting of lenders led by State Bank of India (SBI) and the Visa Steel management last week, the restructuring of loans was discussed. Lenders had attempted to convert Visa’s loans into equity vis the strategic debt resolution (SDR) norms in September 2015. However, the proposal fell through as banks failed to convert the debt within the stipulated time of 210 days.
With SDR not having been a successful mechanism by which to resolve the problem of non-performing assets, banks have been hoping the S4A (scheme for sustainable structuring of stressed assets) guidelines might be tweaked. However, the Reserve Bank of India (RBI) is unlikely to allow much more forbearance.
Visa’s debt of around Rs 3,000 crore was restructured under the corporate debt restructuring mechanism in FY13. It is promoted by Visa Infrastructure and Visa International, which hold 40.35% and 21.63% shares of the company, respectively. Among the lenders are Bank of Baroda, Punjab National Bank, Bank of India, Canara Bank, Syndicate Bank, and a few banks from the SBI group.
In its FY16 annual report, Visa Steel said that due to the continued stress across the steel sector, it has not been able to service its debt and has become a non-performing asset (NPA) with its lenders. “As per RBI, if the loan is already an NPA, there is no limit to the kind of restructuring that is possible. The company has been in discussions with lenders to induct investor and restructure the loan to a sustainable level,” it said.