The Kolkata bench of the National Company Law Tribunal (NCLT) on Friday admitted insolvency proceedings against Electrosteel Steels, its chief financial officer (CFO) Ashutosh Agarwal told FE. The company was referred to the bankruptcy court by State Bank of India (SBI) following a nudge from the Reserve Bank of India (RBI). Agarwal said lenders have appointed Dhaivat Anjaria, partner, PWC, as the interim resolution professional (IRP). The company owes lenders Rs 11,309 crore and reported a net loss of Rs 1,463 crore in FY17 on revenues of Rs 2,774 crore. SBI counsel Rishav Banerjee had informed the court on July 10 that the total default stood at Rs 1,400 crore.
“The date of default was around August 2015. Electrosteel Steels has admitted the liability on several occasions,” he said, adding that in a letter sent last month, the company said there was a default in making payments under the master restructuring agreement. Electrosteel Steels counsel Sachchida Nand Pandey told FE that according to the IBC, a committee of creditors should be constituted by the IRP within 30 days after his appointment. “But before that, the matter will come up for hearing at the NCLT on August 2,” Pandey said. The RBI had on June 13 asked banks to refer a dozen troubled companies to the NCLT. The total exposure to these 12 companies adds up to a little over Rs 2 lakh crore, or about 30% of Rs 7 lakh crore worth of gross non-performing assets (NPAs) in the banking system. The central bank has said the accounts on the list constitute about 25% of the current gross NPAs of the banking system. Other companies, among the dozen identified by the RBI, admitted by the NCLT include Jyoti Structures, Monnet Ispat and Alok Industries. Lenders had initiated a strategic debt restructuring (SDR) on June 8, 2015, and on January 7, 2016, the shareholders in an extraordinary general meeting approved the joint lenders forum’s (JLF) decision to convert a part of the principal restructured debt to equity.
The company had said in its annual report for FY16 that a delay in release of working capital of Rs 1,300 crore under the corporate debt restructuring (CDR) package impacted the cash flow, which resulted in erosion of the company’s net worth for four successive years. The 12 accounts, identified by the RBI are those to which banks have an exposure of more than Rs 5,000 crore each, more than 60% of which has been recognised as NPAs. Once these cases are with the NCLT, lenders need to set up a committee of creditors that will come up with a plan on how the asset will be tackled. 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.