Financial claims received by the resolution professional (RP) for Essar Steel from lenders, operational creditors and employees have crossed Rs 77,770 crore. Of this, the RP had till October 18 acknowledged Rs 50,000 crore, according to a statement on the company’s website. The biggest chunk of claims — Rs 54,851 crore — was made by 49 financial creditors while operational creditors had sought Rs 22,914 crore. Employees of the company were looking to get Rs 20 crore. Among banks, State Bank of India (SBI) had claimed an amount of Rs 13,652.8 crore while IDBI Bank was looking to recover for Rs 5,177.7 crore. Among others that had put in a claim are Canara Bank, Standard Chartered Bank, HDFC and Axis Bank. Edelweiss Asset Reconstruction Company was looking to recover Rs 5,527 crore.
In August, the National Company Law Tribunal (NCLT) had appointed Satish Kumar Gupta as the interim resolution professional for Essar Steel. The steelmaker was among the 12 companies that the Reserve Bank of India (RBI) had asked banks to refer to the bankruptcy court. On June 13, the central bank had asked banks to refer 12 large stressed accounts — with loans close to Rs 2.4 lakh crore — to the NCLT. Last month, Gupta had sought resolution plans from potential investors by October 23. “The RP under Section 25(2)(h) of the Insolvency and Bankruptcy Code hereby invites all prospective lenders, investors and any other persons who meet the eligibility criteria to put forward resolution plans in respect of the Corporate Debtor,” the public notice had said.
Essar Steel, which has a steel-making capacity of 9.7 million tonnes per annum, owes more than Rs 45,000 crore to lenders, of which Rs 31,671 crore was classified by banks as non-performing assets as of March 31, 2016. SBI leads a consortium of 22 lenders that accounts for 93% of the company’s debt. Essar Steel also owes Standard Chartered Bank close to Rs 3,500 crore; Essar Steel’s Mauritius-based subsidiary had taken a loan from SCB guaranteed by Essar Steel’s promoters. On July 4, Essar had moved the Gujarat High Court against its inclusion in the list of 12 defaulters to be referred to the NCLT. The company’s counsel had argued in the court that its restructuring proposal was at an advanced stage and that the financial and operational improvements since March 2016 had not been taken into account by the RBI.
However, the court had dismissed Essar Steel’s appeal on July 17. Once cases are admitted by the NCLT, lenders need to set up a committee of creditors to come up with a resolution plan. If the committee is unable to find a solution within 180 days — this can be extended to 270 days — the borrowing entity will go into liquidation.