Lenders to Bhushan Steel have decided to appoint Alvarez & Marsal (A&M), a restructuring and turnaround firm, to help the existing management run the company. Bankers told FE for now, the consultant will provide strategic inputs and, at a later stage, oversee cash management. “Deloitte is looking after the cash management and we want another firm to supervise Bhushan Steel’s operations,” a senior banker explained. He added that the idea was not to affect a change in the management but merely to add bandwidth on behalf of the lenders.
The steelmaker, which has three plants in Odisha, Maharashtra and UP, owed lenders an amount of Rs 42,000 crore as on March 2016. It reported a net loss of Rs 656.21 crore in the June quarter of FY17 on the back of Rs 3,365 crore in revenues in the same period.
In FY16, its net loss stood at Rs 2,839 crore and its revenues were at Rs 11,803 crore.
A senior executive of Bhushan Steel told FE Deloitte was conducting the concurrent audit, while M N Dastur was the technical adviser to the firm. Officials at A&M’s Mumbai office were unavailable for comment.
In its FY16 annual report, Bhus-han Steel said that it has been facing severe stress in its debt servicing for past few years due to several reasons and circumstanc-es faced by the firm, which led to adding on stress on cash flows and consequently, on debt servicing.
Debt: Rs 42,000 cr
Interest: Rs 4,582 cr
Loss: Rs 2,911 cr
“The problems got aggravated in last two financial years when there has been sharp surge in imports of steel in India which led to substantial fall in domestic steel prices impacting the margins and cash flows significantly. Further, Joint Lender’s Forum(JLF) has already been formed under the RBI Guidelines and JLF meetings are being conducted regularly to arrive at a long term viable solution for the company,” it said.
Bhushan Steel was in the news over the role of its vice-chairman and managing director, Neeraj Singal, in an alleged case of bribery involving Syndicate Bank in 2014. The CBI had arrested Singal after the special court issued a non-bailable warrant. Singal holds a 22.73% stake in the firm while chairman Brij Bhushan Singal owns 18.15%.