Even though bankers are wary after the arrest of Bhushan Power and Steel CFO Arun Agarwal, they have agreed to disburse R3,000 crore for capex of the steelmaker managed by Sanjay Singal, the elder son of Brij Bhushan Singal who is the founder of Bhushan Steel.
Three bankers, who spoke on the condition of anonymity, said banks had sanctioned close to R8,000 crore, which the company was to use for expansion of its facilities in phase 6. Of that, R3,000 crore was yet to be disbursed and some bankers had withheld it, citing the arrest of the CFO. ?The company?s CFO was arrested by CBI recently. We were apprehensive of the connections, if any, between these two companies,? said one of
the banker cited above.
A meeting of the bank consortium was convened on September 2 where the company requested the banks to go ahead with their earlier commitments. Lenders told FE that they were concerned if the company had any links to Bhushan Steel and added that the company told them that if the remaining funds are not disbursed, phase 6 will be in a limbo and the entire project would be stuck midway.
New Delhi-based Bhushan Power and Steel is privately held with promoters owning 94.4% shares and rest owned by foreign institutional investors. The company has plants located at five locations in northern and eastern India and began operations in 1970 as a manufacturer of door hinges. In 2011, the Brij Bhushan Singal business group was split into two with the father and younger son Neeraj Singal managing the listed Bhushan Steel and the elder son put in charge of the unlisted entity.
An email sent to the company seeking comments on the issue remained unanswered.
According to the company?s annual report of FY14, 41 banks, including seven foreign banks, have lent to the company and its short-term borrowings amount to R4,985.4 crore while long-term borrowings stood at R22,408.8 crore. This takes the total debt to R27,395 crore.
Its revenues were R11,288.7 crore in FY14, up 18.6% from last year, and the company’s profit was up 11.1% from the previous fiscal at R635 crore. The steelmaker has a high net debt-to-equity ratio of 2.43 and witnessed finance costs of R2,955 crore in FY14.
Meanwhile, a CBI court on Monday denied bail to Arun Agarwal after he claimed that he was wrongly arrested in the Syndicate Bank case as he was a Bhushan Power and Steel employee and not an employee of Bhushan Steel. The CBI had arrested Syndicate Bank CMD SK Jain on August 2 for allegedly accepting a bribe of R50 lakh to extend credit facilities to private companies.
Bhushan Steel vice-chairman and managing director Neeraj Singal was also arrested by the CBI following the issuance of a non-bailable warrant against him by a special CBI court. The allegation against Singal was that he was instrumental in passing on the bribe amount to Jain.