Binani Cement tug of war raises these key questions before NCLT

By: | Updated: April 4, 2018 5:15 PM

With Ultratech offering Rs 7,200 crore for Binani Cement, after the NCLT told the creditors and the company to consider an amicable settlement on the issue, top market analysts say that the entire episode raises important questions on transparency of the bidding process.

Ultratech Cements has offerred Rs 7,266 crore from Binani Cements.Ultratech Cement has gone in for an out of court settlement for Rs 7,200 crore for Binani Cements’ assets. (Image: PTI)

With the Aditya Birla group-led Ultratech offering of Rs 7,200 crore for Binani Cement, after the NCLT told the creditors and the company to consider an amicable settlement, top market analysts say that the entire episode raises important questions on transparency of the bidding process. “There is a valid question that has been raised over the transparency of the bidding process and if the NCLT has to really be meaningful, it has to adopt a more transparent process,” Angel Broking said in a note.

Interestingly, Ultratech Cement has gone in for an out of court settlement for Rs 7,200 crore, inviting the ire of Dalmia Bharat. “Dalmia Cements is of the view that if Ultratech really had the intent of quoting Rs 7,266 crore they should have quoted the same during the bidding process itself,” Angel Broking said observing that once the bidding process is complete, making a fresh counter bid outside the purview of NCLT undermines the sanctity of the process.

Further, if Ultratech Cements is permitted to make a counter bid outside the NCLT purview, it could set a precedent for other cases too where promoters of stressed companies approach large business houses to bail them out at better valuations.

It is interesting to observe that while initially  the committee of creditors of chose a Dalmia Bharat Ltd-consortium as the winner, Ultratech had alleged that the process for choosing the top bidder was not transparent and that the resolution professional had not followed industry best practices. Initially, Ultratech had reportedly offered Rs 6,200 crore. “NCLT needs to rethink its entire process wherein the actual bidding should be based on transparent auction where only the reserve price is fixed,” observes the Angel Broking report.  

According to the details available so far, Ultratech has directly made an offer to buy out the 98.43% shares of Binani Cements at a valuation of Rs 7,300 crore. The deal was acceptable to Binani Cements as the company was getting a higher valuation and the debtors also would be fully paid off. Meanwhile, even as both Ultratech and Binani are interested in this revised deal, Dalmia Cements has approached NCLT Appellate Tribunal to declare Ultratech’s bid as void as it is in contrast with the objectives of the NCLT. It will be interesting to see which way the deal goes.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition