Global overcapacity and demand slowdown has resulted in historically low international steel prices, which hurt Indian steel makers.
Electrosteel Steels, which was admitted by the Kolkata bench of the National Company Law Tribunal for insolvency proceedings on July 21, will invite expression of interest from potential investors by the end of this month, two bankers close to the development said. The company, which produces pig iron, billets, TMT bars, wire rods and ductile iron pipes, was referred to the bankruptcy court by the State Bank of India. According to the Insolvency and Bankruptcy Code (IBC) norms, the powers of the board of directors stand suspended and vested in the interim resolution professional. The time allowed for the resolution process is 180 days from the date of admission, which can be further extended to another 90 days. “Expression of interest from potential investors will be invited in the next 1-2 weeks. The due diligence process has been completed,” a banker said. Electrosteel Steels has an integrated steel and ductile iron pipe plan in Jharkhand, a part of which is still under construction. The company incurred an accumulated net loss of Rs 3,189.25 crore up to the year ended March 31, 2017 and as of that date, the company’s current liabilities exceeded its current assets by Rs 5,552.33 crores, data from its 2016-17 annual report showed. In the last quarter, the company reported a net loss of Rs 242.19 crore on revenue of Rs 814.94 crore, compared with a net loss of Rs 270.84 crore on revenue of Rs 882.80 crore in the year-ago period. In the fiscal year ended March 31, 2017, the net loss stood at Rs 1463.47 crore on revenue of Rs 2,844.11 crore.
Due to insufficient funds for completion of remaining modules of the plant, the company is not able to operationalise to its envisaged capacity, it said in its annual report. Global overcapacity and demand slowdown has resulted in historically low international steel prices, which hurt Indian steel makers. Going forward, raw material security and high logistics costs, volatility in supply of prices of raw material and protracted low steel prices are among the risks that could impact the steel sector. Earlier this week Monnet Ispat, another of the12 large companies admitted by the NCLT, invited expression of interest from potential investors through an advertisement. Investors have time till September 25 to submit expression of interest for a resolution plan. In June, the RBI’s Internal Advisory Committee (IAC) had said 12 accounts totaling about 25% of the Rs 8 lakh crore non-performing assets of the Indian banking sector would qualify for immediate reference under IBC. Of these, Rs 6 lakh crore are with the state-run banks. Subsequently, Jyoti Structures, Essar Steel, Monnet Ispat and Energy, Alok Industries, Electrosteel Steels, Amtek Auto, Bhushan Steel, Bhushan Power and Steel, ABG Shipyard, Lanco Infratech and Jaypee Infratech have been admitted by the NCLT.