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MIRA INFORM REPORT
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Report No. : |
487341 |
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Report Date : |
20.01.2018 |
IDENTIFICATION DETAILS
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Name : |
ESSAR STEEL INDIA LIMITED (w.e.f. 18.01.2012) |
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Formerly Known
As : |
ESSAR STEEL LIMITED ESSAR CONSTRUCTIONS LIMITED |
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Registered
Office : |
27 KM, Surat Hazira Road, Hazira, Surat – 394270, Gujarat |
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Tel. No.: |
91-261-2872400 |
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Country : |
India |
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Financials (as
on) : |
31.03.2016 |
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Date of
Incorporation : |
01.06.1976 |
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Com. Reg. No.: |
04-013787 |
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Capital
Investment / Paid-up Capital : |
INR 31532.300 Million |
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CIN No.: [Company Identification
No.] |
U27100GJ1976FLC013787 |
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IEC No.: |
0388147831 |
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GSTIN/UIN : |
Not Divulged |
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TAN No.: [Tax Deduction &
Collection Account No.] |
SRTE00025E |
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PAN No.: [Permanent Account No.] |
AAACE1741P |
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Legal Form : |
A Closely Held Public Limited Liability Company |
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Line of Business
: |
Manufacturer and Selling of Hot Rolled Coils/ Cold Rolled
Coils, Sheets, Plates and Extraction of Minerals. [Registered activity] |
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No. of Employees
: |
Information denied by the management |
RATING & COMMENTS
(Mira Inform has adopted New Rating mechanism w.e.f. 23rd
January 2017)
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MIRA’s Rating : |
D |
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Credit Rating |
Explanation |
Rating Comments |
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D |
High Risk |
Business dealing not recommended or on
secured terms only |
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Status : |
Poor |
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Payment Behaviour : |
Slow and delayed |
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Litigation : |
Clear |
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Comments : |
Subject is a part of “Essar Group”. It is a steel manufacturing company. Its products include hot rolled, cold rolled, galvanized colour coated, plates, pipes shot blasted and primed plates and chequered plates. The company also engaged in steel processing and steel distribution. As per the FY 2016, the company has reported huge loss from its operations which has led to deterioration of its financial profile. Rating is further constrained by ongoing delays in servicing of debt obligations by company and liquidity pressures faced due to extraneous challenges impacting in running of steel plant. The company is found under RBI defaulter and defaulted hefty amounts with Unit Trust of India Limited. Payments terms are reported as slow and delayed. In view of weak financial profile, the subject can be considered for business dealings on safe and secured trade terms and conditions. Note 1: The company is passing through difficult times and its payments are very much delayed to the suppliers. Its bank facilities are also blocked and hence we do not recommend any credit limit. |
NOTES:
Any query related to this report can be made
on e-mail: infodept@mirainform.com
while quoting report number, name and date.
EXTERNAL AGENCY RATING
NOT AVAILABLE
RBI DEFAULTERS’ LIST STATUS
Subject’s name has been found enlisted as a
defaulter in the publicly available RBI Defaulters’ list and the details of the
same are as under :
Suit-filed accounts (Willful Defaulters) of INR 2.500 Million and above as on 09-May-2017
Borrowers details
|
Borrower name |
ESSAR STEEL LIMITED |
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Address |
POST HAZIRA, DIST. SURAT. |
NAME OF DIRECTORS REPORTED BY CREDIT GRANTORS FILING THE SUIT:
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Sr.No. |
Directors Reported by Credit Grantors |
DIN Number |
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UNIT TRUST OF INDIA LIMITED |
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6 |
Ravi Ruia – Vice Chairman |
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1 |
G A Nayak |
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3 |
J Balakrishnan |
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4 |
Jitender Mehra |
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5 |
Prashant Ruia |
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2 |
G Goswami |
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7 |
S V Venkatesan |
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8 |
Sanjeev Shriya |
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9 |
Shashi Ruia |
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10 |
V G Raghavan |
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11 |
Vikram Amin |
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LIST OF CREDIT GRANTORS TO WHICH ESSAR STEEL LIMITED IS A DEFAULTER:
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Names of Credit Grantors |
Branch |
Amount |
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UNIT TRUST OF INDIA LIMITED |
Main Branch |
5335.600 |
|
|
Total |
5335.600 |
EPF (Employee Provident Fund) DEFAULTERS’ LIST STATUS
Subject’s name is not enlisted as a defaulter
in the publicly available EPF (Employee Provident Fund) Defaulters’ list as of
31-03-2016.
BIFR (Board for Industrial & Financial Reconstruction) LISTING STATUS
Subject’s name is not listed as a Sick Unit in
the publicly available BIFR (Board for Industrial & Financial
Reconstruction) list as of 20.01.2018
IBBI (Insolvency and Bankruptcy Board of India) LISTING STATUS
Subject’s name is not listed in the publicly
available IBBI (Insolvency and Bankruptcy Board of India) list as of report
date.
INFORMATION DENIED
Management Non-Cooperative (91-261-6682400)
LOCATIONS
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Registered Office/ Plant 1 : |
27KM, Surat Hazira Road, Hazira, Surat – 394270, Gujarat, India |
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Tel. No.: |
91-261-2872400 / 6682400 |
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Fax No.: |
91-261-2872400 / 6682796 / 6685731 |
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E-Mail : |
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Website: |
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Corporate Office : |
Essar House, 11, Keshavrao Khadye Marg, Mahalaxmi, Mumbai – 400034,
Maharashtra, India |
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Tel. No.: |
91-22-66601100 / 24950606 |
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Fax No.: |
91-22-24928896 |
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Marketing Office: |
No.301, Sidhu Sree Vaishnavi
Arcade (Opposite to Care Hospital), Road No 1, Banjara Hills, Hyderabad –
500034, Telangana, India |
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Marketing & Sales Office : |
6th Floor, Tower-2, Equinox Business Park (Peninsula Techno
Park) Off Bandra Kurla Complex, LBS Marg, Kurla (West), Mumbai – 400070,
Maharashtra, India |
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Tel. No.: |
91-22-67335000 |
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Fax No.: |
91-22-67082189 |
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E-Mail : |
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Plant 2 : |
Scindia Road, Near Flyover, Visakhapatnam – 530004, Andhra Pradesh,
India |
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Tel. No.: |
91-891-2523213 |
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Fax No.: |
91-891-2559383 / 2556907 |
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Factory: |
Pune Facility, Gat No.740, Sanaswadi, Pune – 412208, Maharashtra,
India |
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Processing &
Distribution Facility Network : |
Gat No. 437 and 442, Golechiwadi, Ambi-Nigade Road, MIDC-Talegaon, Pune – 410507, Maharashtra, India |
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Tel. No.: |
91-211-4661401 |
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Regional Head : |
Plot No A - 6, Sipcot, Oragadam, Sriperumbudur (TK) Kanchipuram,
Chennai – 602112, Tamilnadu, India |
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Other Plants : |
Located at: Downstream
capability hub ·
Pulne, Maharashtra, India Beneficiation Plant ·
Bailadilla,
Chhattisgarh, India ·
Dabuna, Odisha, India Pellet Plant ·
Visakhapatnam,
Andhra Pradesh, India |
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Branch Office: |
A-5 Sector-3, Noida, Uttar Pradesh, India |
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Branch Offices: |
Located at: · Mumbai · Hazira · Vadinar · New Delhi · Vishakhapatnam |
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Branch Office: |
Essar House, Opposite Gujarat College Ellisbridge, Ahmedabad – 380006 Gujarat, India |
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Tel. No: |
91-79-6608 6666 |
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Fax No: |
91-79-6608 6608 |
DIRECTORS
AS ON 31.03.2017
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Name : |
Mr. Dilip Oommen |
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Designation : |
Managing Director |
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Address : |
D-3/4 Nand Niketan Essar Township, Hazira, Surat - 394270,
Gujarat, India |
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Date of Birth/Age : |
28.03.1958 |
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Qualification : |
Degree in Metallurgical Engineering |
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PAN No: |
AAHPO0679E |
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Date of Appointment : |
17.12.2011 |
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DIN No. : |
02285794 |
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Name : |
Mr. Rajiv Kumra Bhatnagar |
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Designation : |
Wholetime Director |
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Address : |
C-2/11, Nand Niketan, Essar Township, Hazira, Surat – 394270, Gujarat, India |
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Date of Appointment : |
22.11.2016 |
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DIN No. : |
07018252 |
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Name : |
Mr. Venkatraman Govind Raghavan |
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Designation : |
Director |
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Address : |
Flat No 171/172, 17th Floor, Kalpataru Residency, Sion Circle,
Sion (East), Mumbai - 400022, Maharashtra, India |
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Date of Birth/Age : |
16.07.1945 |
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Qualification : |
B.COM, C.A. |
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PAN No: |
ADPPR2424P |
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Date of Appointment : |
29.10.2003 |
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DIN No.: |
00008683 |
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Name : |
Mr. Arvind Pande |
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Designation : |
Director |
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Address : |
E-148(FF), East of Kailash, New Delhi - 110065, India |
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Qualification : |
Bachelor Degree in Science and Economics |
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Date of Birth |
06.09.1942 |
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PAN No: |
AAAPP0167H |
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Date of Appointment : |
28.09.2013 |
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DIN No. : |
00007067 |
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Name : |
Mr. Prashant Ruia |
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Designation : |
Director |
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Address : |
Lereve Tower 4300 Dubai Marina, Po Box 293778, Dubai, Na, United Arab
Emirates |
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Date of Birth/Age : |
04.06.1969 |
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Qualification : |
B.Com |
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PAN No: |
AABPR5283M |
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Date of Appointment : |
27.11.2014 |
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DIN No. : |
01187548 |
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Name : |
Mr. Parveen Kumar Malhotra |
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Designation : |
Additional Director |
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Address : |
13-B, Madhuban, G. J. Bhosle Marg, Oppsite Sachivalaya Gymkhana, Nariman Point , Mumbai-400021, Maharashtra, India |
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Date of Appointment : |
16.09.2016 |
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DIN No. : |
03494232 |
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Name : |
Mr. Sunit Joshi |
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Designation : |
Nominee Director |
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Address : |
Flat No. 4-D, C Building Harbour Heights, Colaba, Mumbai-400005, Maharashtra, India |
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Date of Appointment : |
22.11.2016 |
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DIN No. : |
02962154 |
KEY EXECUTIVES
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Name : |
Bhadresh Shah and Associates |
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Designation : |
Practicing Company Secretary |
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Address : |
21, Hasan Ali Building, 2nd Floor, 17, Jijobhoy Dadabhai
Lane, Behind Videocon House, Fort, Mumbai – 400001, Maharashtra, India |
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Name : |
Mr. Pankaj Shivnarayan Chourasia |
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Designation : |
Company Secretary |
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Address: |
Jai Siyaram, Flat No.1, Plot 131, Sector-12, Blue Heaven Building, Vashi, Navi Mumbai - 400703, Maharashtra, India |
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Date of Birth: |
15.07.1975 |
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Date of Appointment : |
27.10.2015 |
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Qualification: |
M.Com/ CS/ LLB |
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PAN No.: |
ADKPC1762C |
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Name : |
Mr. Jatinder Dinanath Mehra |
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Designation : |
Chief Executive Officer |
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Address: |
C-1/36 Safdarjung Dev Area, New Delhi – 110016, India |
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Date of
Appointment : |
21.06.2017 |
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PAN No.: |
AAUPM6409M |
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Name : |
Mr. Suresh Chandra Jain |
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Designation : |
Chief Finance Officer |
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Address: |
1703-4, Tower A, Sahyadri, Upper Govind Nagar, Malad (East), Mumbai – 400097, Maharashtra, India |
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Date of
Appointment : |
01.07.2017 |
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PAN No.: |
ACBPJ9739L |
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Name : |
Mr. Abhishek Pundhir |
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Designation : |
Deputy Accounts Manager – Finance Department |
MAJOR SHAREHOLDERS
AS ON 31.03.2016
|
Names of Equity
Shares |
|
No. of Shares |
|
Essar Steel Asia Holdings Limited |
|
2153587448 |
|
Imperial Consultants and Securities Private Limited |
|
672232720 |
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Shares under Trust (Venkatraman Govind Raghavan) |
|
191517500 |
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Names of Preference
Shares |
|
No. of Shares |
|
|
|
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|
IFCI Limited |
|
22116599 |
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Imperial Consultants and Securities Private Limited |
|
16940180 |
Equity Share Break up (Percentage of Total Equity)
As on: 21.12.2016
|
Category |
Percentage |
|
Promoters |
|
|
Body corporate |
91.37 |
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Others |
6.16 |
|
Public/Other than
promoters |
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|
Individual/Hindu Undivided Family – India |
2.20 |
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Non-resident Indian (NRI) |
0.07 |
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Banks |
0.03 |
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Body corporate |
0.17 |
|
Total |
100.00 |
BUSINESS DETAILS
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Line of Business : |
Manufacturer and Selling of Hot Rolled Coils/ Cold Rolled
Coils, Sheets, Plates and Extraction of Minerals. [Registered activity] |
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Products : |
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Brand Names : |
Not Available |
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Agencies Held : |
Not Available |
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Exports : |
Not Divulged |
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Imports : |
Not Divulged |
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Terms : |
Not Divulged |
PRODUCTION STATUS (AS ON 31.03.2015)
|
Particulars |
Unit |
Production |
|
Iron Ore Pellet |
MT |
4739555 |
|
Hot Briquette Iron / Direct Reduced Iron |
MT |
829592 |
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Hot Metal |
MT |
829592 |
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Hot Rolled Coils/Cold Rolled Coils/Plates |
MT |
2524405 |
|
Plates |
MT |
629799 |
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Pipes |
MT |
178254 |
GENERAL INFORMATION
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Suppliers : |
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Customers : |
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No. of Employees : |
Information denied by the management |
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Bankers : |
·
Yes Bank Limited, 9th Floor,
Nehru Centre, Discovery of India, Dr. Annie Besant Road, Worli, Mumbai –
400018, Maharashtra, India ·
Indian Overseas Bank, 229, Bhakhtawar,
Ground Floor, Nariman Point, Mumbai – 400021, Maharashtra, India |
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Facilities : |
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Financial Institutions : |
· SBICAP Trustee Company Limited, 202 Maker Tower E, Cuffe Parade, Mumbai – 400005, Maharashtra, India ·
Axis Trustee Services Limited, Axis House,
2nd Floor, Bombay Dyeing
Mills Compound, Pandurang Budhkar Marg, Worli, Mumbai – 400025, Maharashtra,
India |
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Auditors : |
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Name : |
M M Chaturvedi and Company Chartered Accountants |
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Address : |
24, Atlanta Nariman, Point Mumbai – 400021, Maharashtra, India |
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PAN
No.: |
AABFD7919A |
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Memberships : |
Not Divulged |
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Collaborators : |
Not Divulged |
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Holding Company |
· Essar Steel Asia Holdings Limited (FKA Essar Resources Mauritius Limited) Immediate Holding Company- (ESAHL) · Essar Steel Mauritius Limited- Holding Company of Essar Steel Asia Holdings Limited - (ESML) · Essar Global Fund Limited (FKA Essar Global Limited), Cayman Islands- Holding Company of Essar Steel Mauritius Limited (EGFL) |
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Subsidiary company : |
· Essar Steel Middle East (ESMEF) · Essar Steel Trading FZE (ESTF) · Trinity Coal Marketing LLC (EMA) · Odisha Slurry Pipeline Infrastructure Limited (OSPIL) (U60200OR2014PLC018639) · Hazira Coke Limited (U23100GJ2014PLC078242) · Banner Coal Terminal LLC · RMG INC Trinity RMG Holdings LLC · Frasure Creek Mining LLC · Essar Mineral Cooperatief U.A. · Essar Minerals Canada Limited · Trinity Coal Corporation · Hughes Creek terminal LLC · Falcon Resources LLC · Prater Branch Resources LLC · Paradeep Steel Company Limited (PSCL) (U27100MH2011PLC217214) · Essar Steel Offshore Limited (ESOSL) · Essar Minerals Limited (FKA Essar Mining Limited) · New Trinity Holdings LLC (NTHL) · New Resources Inc (NRI) · Essar Minerals INC · Trinity Parent Corporation · Trinity Coal Partners LLC · New Trinity Coal INC · Bear Fork Resources LLC · Deep Water Resources LLC · Levisa Fork Resources LLC · North Springs Resources LLC · Little Elk Mining Company LLC · Essar Minerals Limited |
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Fellow Subsidiary |
· Aegis Limited (U99999MH1992PLC064767) · Essar Steel Logistics Limited (U60220GJ2013PLC074244) · Essar Projects (India) Limited (U99999MH1989PLC053280) · Essar Shipping Limited (L61200GJ2010PLC060285) · Essar Bulk Terminal Paradip Limited (U63000GJ2009PLC058496) · Essar Power Gujarat Limited (U74900GJ2007PLC066273) · Essar Power M P Limited (U40100DL2005PLC201961) · Vadinar Properties Limited (U70100MH2006PLC160616) · Essar Power limited (U40100GJ1991PLC064824) · Essar Power (jharkhand ) Limited (U31101DL2005PLC211274) · Essar Power Transmission Company Limited (U99999DL2005PLC208864) · Essar Pellets Marketing Limited (U27106MH2007PLC172940) · Essar Oil Limited (L11100GJ1989PLC032116) · Essar Electric Power Development Corporation Limited (U40100MH1997PLC110104) · Vadinar Power Company Limited (U40100GJ1997PLC033108) · Essar Offshore Subsea Limited (U11101MH2008PLC179089) · Essar Refinery Projects Limited (U45200GJ2010PLC062785) · Essar Bulk Terminal (Salaya) Limited (U63032MH2007PLC176225) · Arkay Logistics Limited (U63000MH2004PLC149214) · Essar Ports Limited (L85110GJ1975PLC054824) · Vadinar Oil Terminal Limited (U35111GJ1993FLC053434) · Equinox Business Parks Private Limited (U70102MH2007PTC172950) · Essar Mineral Resources Limited (U13100GJ2006PLC047506) · Essar Global Services FZE · Essar Steel Algoma Inc. · PT Essar Indonesia · Essar Energy Limited · Essar Oil (UK) Limited · Brahmani Thermal Power Private Limited (U40109DL2005PTC231302) · Essar Constructions Overseas Limited · Essar Oilfield Services India Limited (U93090MH2006PLC163779) · Vadinar Ports and Terminals Limited (U63023GJ2009FLC056684) · Essar Telecom Kenya Limited · AGC Networks Limited (L32200MH1986PLC040652) · Essar Africa Holdings Limited · Peak Trading Overseas Limited · Tirunelveli Wind Farms Limited (U01403MH2007PLC166813) · Essar Steel Limited · Essar Shipping and Logistics Limited |
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|
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Associate Company : |
· Bhander Power Limited (U31101MP1995PLC009646) · Essar Bulk Terminal Limited (U13100GJ2004PLC043477) · Essar Power (Orissa) Limited (U31101GJ2005PLC081701) · Essar Power Hazira Limited (U40300GJ2006PLC063146) · Essar Steel Processing FZCO · Essar Steel Chhattisgarh Limited (U27100GJ2005FLC046274) · Essar Power M P Limited (U40100DL2005PLC201961) |
CAPITAL STRUCTURE
AFTER 21.12.2016
Authorised Capital : INR
72750.000 Million
Issued, Subscribed & Paid-up Capital : INR 31525.566 Million
AS ON 31.03.2016
Authorised Capital :
|
No. of Shares |
Type |
Value |
Amount |
|
|
|
|
|
|
7175000000 |
Equity Shares |
INR 10/- each |
INR 71750.000 Million |
|
100000000 |
Preference Shares |
INR 10/- each |
INR 1000.000 Million |
|
|
|
|
|
|
|
Total |
|
INR 72750.000 Million |
Issued, Subscribed & Paid-up Capital :
|
No. of Shares |
Type |
Value |
Amount |
|
|
|
|
|
|
3108957660 |
Equity Shares |
INR 10/- each |
INR
31089.600 Million |
|
|
Forfeited shares |
|
INR 6.700
Million |
|
43598951 |
Preference Shares |
INR 10/- each |
INR 436.000
Million |
|
|
|
|
|
|
|
Total |
|
INR 31532.300 Million |
FINANCIAL DATA
[all figures are
in INR Million]
ABRIDGED
BALANCE SHEET (STANDALONE)
|
SOURCES OF FUNDS |
31.03.2016 |
31.03.2015 |
31.03.2014 |
|
I.
EQUITY
AND LIABILITIES |
|
|
|
|
(1)Shareholders' Funds |
|
|
|
|
(a) Share Capital |
31532.300 |
31532.300 |
28692.200 |
|
(b) Reserves and Surplus |
54633.700 |
109594.300 |
56147.800 |
|
(c) Money
received against share warrants |
0.000 |
0.000 |
0.000 |
|
|
|
|
|
|
(2) Share Application money pending
allotment |
0.000 |
0.000 |
0.000 |
|
Total
Shareholders’ Funds (1) + (2) |
86166.000 |
141126.600 |
84840.000 |
|
|
|
|
|
|
(3)
Non-Current Liabilities |
|
|
|
|
(a) long-term borrowings |
202113.700 |
224769.300 |
284967.300 |
|
(b) Deferred tax liabilities (Net) |
0.000 |
0.000 |
0.000 |
|
(c) Other long-term
liabilities |
34.700 |
78408.500 |
50667.100 |
|
(d) long-term
provisions |
995.500 |
2638.000 |
6035.600 |
|
Total Non-current
Liabilities (3) |
203143.900 |
305815.800 |
341670.000 |
|
|
|
|
|
|
(4)
Current Liabilities |
|
|
|
|
(a) Short-term
borrowings |
92766.200 |
46813.800 |
13164.600 |
|
(b) Trade
payables |
64017.500 |
66796.000 |
71362.700 |
|
(c) Other
current liabilities |
166606.800 |
73515.100 |
39032.300 |
|
(d) Short-term
provisions |
14295.200 |
3755.600 |
4012.000 |
|
Total Current
Liabilities (4) |
337685.700 |
190880.500 |
127571.600 |
|
|
|
|
|
|
TOTAL |
626995.600 |
637822.900 |
554081.600 |
|
|
|
|
|
|
II.
ASSETS |
|
|
|
|
(1)
Non-current assets |
|
|
|
|
(a) Fixed
Assets |
|
|
|
|
(i)
Tangible assets |
423964.900 |
419899.700 |
141257.800 |
|
(ii)
Intangible Assets |
174.800 |
243.100 |
239.100 |
|
(iii) Tangible assets
capital work-in-progress |
33967.600 |
45823.600 |
272947.800 |
|
(iv)
Intangible assets under development |
0.000 |
0.000 |
0.000 |
|
(b) Non-current Investments |
13938.300 |
12756.700 |
11544.300 |
|
(c) Deferred tax assets (net) |
48663.400 |
20864.000 |
25590.400 |
|
(d)
Long-term loans and advances |
5724.100 |
6947.500 |
7182.300 |
|
(e) Other
Non-current assets |
9724.100 |
10643.300 |
11108.200 |
|
Total Non-Current
Assets |
536157.200 |
517177.900 |
469869.900 |
|
|
|
|
|
|
(2)
Current assets |
|
|
|
|
(a)
Current investments |
0.000 |
0.000 |
0.000 |
|
(b)
Inventories |
23255.500 |
26896.500 |
32630.400 |
|
(c) Trade
receivables |
16147.700 |
12765.400 |
11569.800 |
|
(d) Cash and
bank balances |
5139.400 |
7671.800 |
7294.900 |
|
(e)
Short-term loans and advances |
38321.100 |
32117.400 |
30707.500 |
|
(f) Other
current assets |
7974.700 |
41193.900 |
2009.100 |
|
Total
Current Assets |
90838.400 |
120645.000 |
84211.700 |
|
|
|
|
|
|
TOTAL |
626995.600 |
637822.900 |
554081.600 |
PROFIT
& LOSS ACCOUNT (STANDALONE)
|
|
PARTICULARS |
31.03.2016 |
31.03.2015 |
31.03.2014 |
|
|
SALES |
|
|
|
|
|
Total
Revenue from operations |
136544.100 |
139335.800 |
133268.800 |
|
|
Other Income |
7241.100 |
4357.700 |
10216.700 |
|
|
TOTAL |
143785.200 |
143693.500 |
143485.500 |
|
|
|
|
|
|
|
Less |
EXPENSES |
|
|
|
|
|
Cost of Materials
Consumed |
92967.600 |
77859.400 |
76621.600 |
|
|
Purchases of
Stock-in-Trade |
1605.000 |
2978.000 |
6680.500 |
|
|
Changes in inventories of
finished goods, work-in-progress and Stock-in-Trade |
1426.300 |
4384.000 |
2662.400 |
|
|
Other expenses |
40394.000 |
32988.000 |
40685.400 |
|
|
Prior period items |
58.500 |
(879.900) |
(16014.700) |
|
|
Exceptional items |
27930.400 |
(33797.200) |
0.000 |
|
|
TOTAL |
168911.200 |
86876.300 |
114192.100 |
|
|
|
|
|
|
|
|
PROFIT/
(LOSS) BEFORE INTEREST, TAX,
DEPRECIATION AND AMORTISATION |
(25126.000) |
56817.200 |
29293.400 |
|
|
|
|
|
|
|
Less |
FINANCIAL
EXPENSES |
44676.300 |
38650.100 |
41767.000 |
|
|
|
|
|
|
|
|
PROFIT / (LOSS) BEFORE TAX, DEPRECIATION AND AMORTISATION |
(69802.300) |
18167.100 |
(12473.600) |
|
|
|
|
|
|
|
Less |
DEPRECIATION/
AMORTISATION |
17356.900 |
8077.500 |
10673.800 |
|
|
|
|
|
|
|
|
PROFIT/ (LOSS)
BEFORE TAX |
(87159.200) |
10089.600 |
(23147.400) |
|
|
|
|
|
|
|
Less |
TAX |
(29157.800) |
3609.100 |
(7176.000) |
|
|
|
|
|
|
|
|
PROFIT/ (LOSS)
AFTER TAX |
(58001.400) |
6480.500 |
(15971.400) |
|
|
|
|
|
|
|
Add |
PREVIOUS
YEARS’ BALANCE BROUGHT FORWARD |
(31502.900) |
(39252.800) |
(23281.400) |
|
|
|
|
|
|
|
Add |
Balance
value of assets transfer from Assets as per |
0.000 |
(346.000) |
0.000 |
|
|
|
|
|
|
|
Less |
APPROPRIATIONS |
|
|
|
|
|
Transfer to General Reserve |
(1678.200) |
(1615.400) |
0.000 |
|
|
Total |
(1678.200) |
(1615.400) |
0.000 |
|
|
|
|
|
|
|
|
Balance
Carried to the B/S |
(87826.100) |
(31502.900) |
(39252.800) |
|
|
|
|
|
|
|
|
EARNINGS
IN FOREIGN CURRENCY |
|
|
|
|
|
F.O.B. Value of Exports |
14579.200 |
19744.900 |
39391.900 |
|
|
Earnings on interest |
1182.800 |
1493.400 |
2755.200 |
|
|
TOTAL
EARNINGS |
15762.000 |
21238.300 |
42147.100 |
|
|
|
|
|
|
|
|
IMPORTS |
|
|
|
|
|
Raw Materials |
34753.700 |
25448.200 |
18231.200 |
|
|
Components and Stores parts |
4499.600 |
5382.700 |
4515.100 |
|
|
Capital Goods |
384.300 |
277.600 |
251.600 |
|
|
TOTAL
IMPORTS |
39637.600 |
31108.500 |
22997.900 |
|
|
|
|
|
|
|
|
Earnings
/ (Loss) Per Share (INR) |
(18.67) |
2.26 |
(5.70) |
CURRENT MATURITIES
OF LONG TERM DEBT DETAILS
|
Particulars |
31.03.2016 |
31.03.2015 |
31.03.2014 |
|
Current Maturities of Long term debt |
24530.800 |
12500.500 |
16062.800 |
|
Cash generated from operations |
NA |
NA |
NA |
|
Net cash flows from (used in) operations |
4510.400 |
33126.100 |
47809.600 |
|
Net cash flows from (used in) operating activities |
4422.700 |
33145.700 |
47744.300 |
KEY
RATIOS
EFFICIENCY RATIOS
|
PARTICULARS |
31.03.2016 |
31.03.2015 |
31.03.2014 |
|
Average Collection Days (Sundry
Debtors / Income * 365 Days) |
43.16 |
33.44 |
31.69 |
|
|
|
|
|
|
Account Receivables Turnover (Income / Sundry Debtors) |
8.46 |
10.92 |
11.52 |
|
|
|
|
|
|
Average Payment Days (Sundry Creditors / Purchases * 365 Days) |
247.07 |
301.60 |
312.69 |
|
|
|
|
|
|
Inventory Turnover (Operating Income / Inventories) |
(0.89) |
2.24 |
1.01 |
|
|
|
|
|
|
Asset Turnover (Operating Income / Net Fixed Assets) |
(0.04) |
0.13 |
0.08 |
LEVERAGE RATIOS
|
PARTICULARS |
31.03.2016 |
31.03.2015 |
31.03.2014 |
|
Debt Ratio ((Borrowing
+ Current Liabilities) / Total Assets) |
0.90 |
0.67 |
0.77 |
|
|
|
|
|
|
Debt Equity Ratio (Total Liability / Networth) |
3.71 |
2.01 |
3.70 |
|
|
|
|
|
|
Current Liabilities to Networth (Current Liabilities / Net Worth) |
3.92 |
1.35 |
1.50 |
|
|
|
|
|
|
Fixed Assets to Networth (Net Fixed Assets / Networth) |
5.32 |
3.30 |
4.89 |
|
|
|
|
|
|
Interest Coverage Ratio (PBIT / Financial Charges) |
(0.46) |
1.56 |
0.79 |
PROFITABILITY RATIOS
|
PARTICULARS |
|
31.03.2016 |
31.03.2015 |
31.03.2014 |
|
Net Profit Margin ((PAT / Sales) * 100) |
% |
(39.16) |
7.05 |
(9.32) |
|
|
|
|
|
|
|
Return on Total Assets ((PAT / Total Assets) * 100) |
% |
(8.53) |
1.54 |
(2.24) |
|
|
|
|
|
|
|
Return on Investment (ROI) ((PAT / Networth) * 100) |
% |
(62.06) |
6.96 |
(14.63) |
SOLVENCY RATIOS
|
PARTICULARS |
31.03.2016 |
31.03.2015 |
31.03.2014 |
|
Current Ratio (Current
Assets / Current Liabilities) |
0.27 |
0.63 |
0.66 |
|
|
|
|
|
|
Quick Ratio ((Current Assets – Inventories) / Current
Liabilities) |
0.20 |
0.49 |
0.40 |
|
|
|
|
|
|
G-Score Ratio Financial (Networth / Total Assets) |
0.14 |
0.22 |
0.15 |
|
|
|
|
|
|
G-Score Ratio Debt (Debts / Equity Capital) |
10.13 |
9.01 |
10.95 |
|
|
|
|
|
|
G-Score Ratio Liquidity (Total Current Assets / Total Current Liabilities) |
0.27 |
0.63 |
0.66 |
Total
Liability = Short-term Debt + Long-term Debt + Current Maturities of Long-term
debts
FINANCIAL ANALYSIS
[all figures are
in INR Million]
DEBT EQUITY RATIO
|
Particular |
31.03.2014 |
31.03.2015 |
31.03.2016 |
|
|
(INR
In Million) |
(INR
In Million) |
(INR
In Million) |
|
Share Capital |
28692.200 |
31532.300 |
31532.300 |
|
Reserves & Surplus |
56147.800 |
109594.300 |
54633.700 |
|
Net worth |
84840.000 |
141126.600 |
86166.000 |
|
|
|
|
|
|
Long-term borrowings |
284967.300 |
224769.300 |
202113.700 |
|
Short term borrowings |
13164.600 |
46813.800 |
92766.200 |
|
Current maturities of
long-term debts |
16062.800 |
12500.500 |
24530.800 |
|
Total
borrowings |
314194.700 |
284083.600 |
319410.700 |
|
Debt/Equity
ratio |
3.703 |
2.013 |
3.707 |
YEAR-ON-YEAR GROWTH
|
Year
on Year Growth |
31.03.2014 |
31.03.2015 |
31.03.2016 |
|
|
(INR
In Million) |
(INR
In Million) |
(INR
In Million) |
|
Sales |
133268.800 |
139335.800 |
136544.100 |
|
|
|
4.552 |
(2.004) |
NET PROFIT MARGIN
|
Net
Profit Margin |
31.03.2014 |
31.03.2015 |
31.03.2016 |
|
|
(INR
In Million) |
(INR
In Million) |
(INR
In Million) |
|
Sales |
133268.800 |
139335.800 |
136544.100 |
|
Profit/ (Loss) |
(15971.400) |
6480.500 |
(58001.400) |
|
|
(11.98
%) |
4.65
% |
(42.48
%) |
ABRIDGED
BALANCE SHEET (CONSOLIDATED)
|
SOURCES OF FUNDS |
31.03.2016 |
31.03.2015 |
|
I.
EQUITY
AND LIABILITIES |
|
|
|
(1)Shareholders' Funds |
|
|
|
(a) Share Capital |
31532.300 |
31532.300 |
|
(b) Reserves and Surplus |
14637.600 |
71528.000 |
|
(c) Money
received against share warrants |
0.000 |
0.000 |
|
|
|
|
|
(2) Share Application money pending
allotment |
0.000 |
0.000 |
|
Total
Shareholders’ Funds (1) + (2) |
46169.900 |
103060.300 |
|
|
|
|
|
(3)
Non-Current Liabilities |
|
|
|
(a) long-term borrowings |
211596.500 |
269775.600 |
|
(b) Deferred tax liabilities (Net) |
0.000 |
0.000 |
|
(c) Other long-term
liabilities |
34.700 |
78408.500 |
|
(d) long-term
provisions |
4348.500 |
5805.900 |
|
Total Non-current
Liabilities (3) |
215979.700 |
353990.000 |
|
|
|
|
|
(4)
Current Liabilities |
|
|
|
(a) Short-term
borrowings |
100527.400 |
50720.900 |
|
(b) Trade
payables |
65049.100 |
68702.000 |
|
(c) Other current
liabilities |
206686.100 |
95206.000 |
|
(d) Short-term
provisions |
14903.600 |
4329.700 |
|
Total Current
Liabilities (4) |
387166.200 |
218958.600 |
|
|
|
|
|
TOTAL |
649315.800 |
676008.900 |
|
|
|
|
|
II.
ASSETS |
|
|
|
(1)
Non-current assets |
|
|
|
(a) Fixed
Assets |
|
|
|
(i)
Tangible assets |
456046.600 |
451258.300 |
|
(ii)
Intangible Assets |
174.800 |
243.100 |
|
(iii) Tangible assets
capital work-in-progress |
33967.000 |
45823.400 |
|
(iv)
Intangible assets under development |
0.000 |
0.000 |
|
(b) Non-current Investments |
4416.100 |
5129.900 |
|
(c) Deferred tax assets (net) |
48663.300 |
20864.000 |
|
(d)
Long-term loans and advances |
6382.700 |
8680.000 |
|
(e) Other
Non-current assets |
18602.600 |
9795.300 |
|
Total Non-Current
Assets |
568253.100 |
541794.000 |
|
|
|
|
|
(2)
Current assets |
|
|
|
(a)
Current investments |
0.000 |
0.000 |
|
(b)
Inventories |
23321.900 |
27095.600 |
|
(c) Trade
receivables |
11844.400 |
10602.600 |
|
(d) Cash and
bank balances |
8228.600 |
10969.700 |
|
(e)
Short-term loans and advances |
30912.400 |
45112.600 |
|
(f) Other
current assets |
6755.400 |
40434.400 |
|
Total
Current Assets |
81062.700 |
134214.900 |
|
|
|
|
|
TOTAL |
649315.800 |
676008.900 |
PROFIT
& LOSS ACCOUNT (CONSOLIDATED)
|
|
PARTICULARS |
31.03.2016 |
31.03.2015 |
|
|
SALES |
|
|
|
|
Total
Revenue from operations |
143809.000 |
146927.300 |
|
|
Other Income |
11772.100 |
7868.000 |
|
|
TOTAL |
155581.100 |
154795.300 |
|
|
|
|
|
|
Less |
EXPENSES |
|
|
|
|
Cost of Materials
Consumed |
99730.900 |
83483.300 |
|
|
Purchases of
Stock-in-Trade |
1605.000 |
2978.000 |
|
|
Changes in inventories of
finished goods, work-in-progress and Stock-in-Trade |
1472.600 |
4429.700 |
|
|
Employee benefit expense |
4667.600 |
4055.000 |
|
|
Other expenses |
41098.900 |
34477.800 |
|
|
Prior period items |
7.300 |
(879.900) |
|
|
Extraordinary items |
27930.400 |
(33797.200) |
|
|
TOTAL |
176512.700 |
94746.700 |
|
|
|
|
|
|
|
PROFIT/
(LOSS) BEFORE INTEREST, TAX,
DEPRECIATION AND AMORTISATION |
(20931.600) |
60048.600 |
|
|
|
|
|
|
Less |
FINANCIAL
EXPENSES |
47503.600 |
42572.900 |
|
|
|
|
|
|
|
PROFIT / (LOSS) BEFORE TAX, DEPRECIATION AND AMORTISATION |
(68435.200) |
17475.700 |
|
|
|
|
|
|
Less |
DEPRECIATION/
AMORTISATION |
18466.600 |
9115.700 |
|
|
|
|
|
|
|
PROFIT/ (LOSS)
BEFORE TAX |
(86901.800) |
8360.000 |
|
|
|
|
|
|
Less |
TAX |
(29156.500) |
3609.100 |
|
|
|
|
|
|
|
PROFIT/ (LOSS)
AFTER TAX |
(57745.300) |
4750.900 |
|
|
|
|
|
|
|
Earnings / (Loss) Per
Share (INR) |
(18.66) |
1.62 |
LOCAL AGENCY FURTHER INFORMATION
|
Sr. No. |
Check list by
info agents |
Available in
Report (Yes/No) |
|
1 |
Year of establishment |
Yes |
|
2 |
Constitution of the entity -Incorporation
details |
Yes |
|
3 |
Locality of the entity |
Yes |
|
4 |
Premises details |
No |
|
5 |
Buyer visit details |
-- |
|
6 |
Contact numbers |
Yes |
|
7 |
Name of the person contacted |
No |
|
8 |
Designation of contact person |
No |
|
9 |
Promoter’s background |
Yes |
|
10 |
Date of Birth of Proprietor / Partners /
Directors |
Yes |
|
11 |
Pan Card No. of Proprietor / Partners |
Yes |
|
12 |
Voter Id Card No. of Proprietor / Partners |
No |
|
13 |
Type of business |
Yes |
|
14 |
Line of Business |
Yes |
|
15 |
Export/import details (if applicable) |
No |
|
16 |
No. of employees |
No |
|
17 |
Details of sister concerns |
Yes |
|
18 |
Major suppliers |
No |
|
19 |
Major customers |
No |
|
20 |
Banking Details |
Yes |
|
21 |
Banking facility details |
Yes |
|
22 |
Conduct of the banking account |
-- |
|
23 |
Financials, if provided |
Yes |
|
24 |
Capital in the business |
Yes |
|
25 |
Last accounts filed at ROC, if applicable |
No |
|
26 |
Turnover of firm for last three years |
Yes |
|
27 |
Reasons for variation <> 20% |
-- |
|
28 |
Estimation for coming financial year |
No |
|
29 |
Profitability for last three years |
Yes |
|
30 |
Major shareholders, if available |
Yes |
|
31 |
External Agency Rating, if available |
No |
|
32 |
Litigations that the firm/promoter
involved in |
-- |
|
33 |
Market information |
-- |
|
34 |
Payments terms |
No |
|
35 |
Negative Reporting by Auditors in the
Annual Report |
No |
OPERATIONS
Global economy grew 3.1 percent in 2015. The recovery which continued throughout 2015 remained fragile and was at a slow pace. The growth in Emerging and Developed Economies' declined while a modest recovery continued in Advanced Economies. Three key transitions continue to influence global economic scenario:
1) China's rebalancing from Manufacturing and investment toward consumption and services.
2) Lower prices for Commodities and energy.
3) Tightening of monetary policy in the US.
Growth in United States was 2.5% driven by steady job creation, income growth, lower oil prices and improved consumer confidence. Growth in Japan was 0.6% on account of fiscal support and accommodative financial conditions and rising incomes. The EU area grew by 1.5% with consumption supported by low oil prices and higher net exports.
INDIAN SCENARIO
India has emerged as the world's fastest growing economy beating China. The Indian economy is being viewed as a beacon of stability and growth because of low inflation, modest current account deficit (CAD) and commitment to fiscal rectitude. India's GDP grew 7.6% in FY2015-16 up from 7.2% in FY2014-15. In Q4-FY2015-16, the GDP grew 7.9% up from 7.2% in Q3-FY15 on account of rebound in farm output (-0.1% in Q3 to 2.3% in Q4), improvement in mining (7.1% in Q3 to 8.6% in Q4) and a sharp pickup in electricity generation (5.6% in Q3 to 9.3% in Q4). GDP in FY2016-17 is expected to grow by 7.6% as per RBI and IMF. Favourable monsoon in 2016 is one of the reasons for higher GDP growth boosting agricultural output and rural demand. Improved outlook for the rural economy which has a 51% share in manufacturing and 26% in services will positively impact the non-agriculture sectors. In addition, the Make in India initiatives, creation of Smart cities, the Pay Commission payouts, contained inflation and easy monetary conditions will support increased economic growth.
STEEL INDUSTRY
Global Overview
Global steel demand declined by 2.7% in 2015 over 2014 on the back of decline in demand in China by 5.4% following deceleration in its economy as it began its transition from investment driven growth to consumption driven growth. Steel consumption in India was healthy and encouraging growing at 5.3% in 2015.
World Steel Association Short Range Outlook October 2016. The global steel demand is expected to grow by a modest 0.2% in 2016 to 1,501 Mt as against a decline of -2.7% in 2015. In China, the steel demand decline during 2016 is projected to be less than earlier expected and is pegged at -1.0% attributed to slowdown in construction and manufacturing sectors. In other regions, challenging economic and political environment, insufficient investment expenditure and continued weakness in the manufacturing sector is affecting steel demand growth across major economies. In US, steel demand growth is projected to remain negative in 2016 from the earlier expectation of a positive growth. The lower than expected job market improvement and lower growth in construction activities and the emerging political scenario is pulling down the demand prospects in 2016. Steel demand in US is forecasted to decline by 1.2% in 2016. In the EU, steel demand growth is expected to be modest although economic sentiments and investment conditions continue to improve. Uncertainties in the political landscape relating to the refugee crisis and Brexit raises risks to the improving economic condition. Steel demand in the EU is forecast to grow by 0.8% in 2016.
UNSECURED LOANS:
|
PARTICULARS |
31.03.2016 INR In Million |
31.03.2015 INR In Million |
|
LONG TERM BORROWINGS |
|
|
|
Dollar / Rupee
Notes |
|
|
|
--From Banks |
2132.600 |
2086.500 |
|
--From others |
4.400 |
12.800 |
|
sales tax Deferred loan |
333.200 |
333.200 |
|
Interoperate deposits |
430.200 |
10003.400 |
|
|
|
|
|
SHORT TERM BORROWINGS |
|
|
|
Intercorporate deposits |
32146.400 |
14712.000 |
|
|
|
|
|
Total |
35046.800 |
27147.900 |
INDEX OF CHARGES:
|
S No |
SRN |
Charge Id |
Charge Holder Name |
Date of Creation |
Date of Modification |
Date of Satisfaction |
Amount |
Address |
|
1 |
G01509157 |
10582043 |
IDBI BANK LIMITED |
30/03/2015 |
02/01/2016 |
- |
1000000000.0 |
IDBI TOWER, WORLD TRADE COMPLEXCUFFE PARADEMUMBAIMH400005IN |
|
2 |
C78264777 |
10563354 |
SBICAP TRUSTEE COMPANY LIMITED |
27/03/2015 |
02/01/2016 |
- |
3126500000.0 |
202 MAKER TOWER ECUFFE PARADEMUMBAIMH400005IN |
|
3 |
C78856945 |
10564520 |
SBICAP TRUSTEE COMPANY LIMITED |
18/03/2015 |
02/01/2016 |
- |
1143800000.0 |
202 MAK ER TOWER ECUFFE PARADEMUMBAIMH400005IN |
|
4 |
C78729993 |
10551258 |
SBICAP TRUSTEE COMPANY LIMITED |
20/02/2015 |
02/01/2016 |
- |
9348600000.0 |
202 MAKER TOWER ECUFFE PARADEMUMBAIMH400005IN |
|
5 |
C79074530 |
10544987 |
SBICAP TRUSTEE COMPANY LIMITED |
21/01/2015 |
02/01/2016 |
- |
3310400000.0 |
202 MAKER TOWER ECUFFE PARADEMUMBAIMH400005IN |
|
6 |
C78723392 |
10544982 |
SBICAP TRUSTEE COMPANY LIMITED |
12/01/2015 |
02/01/2016 |
- |
22537629642.0 |
202 MAKER TOWER ECUFFE PARADEMUMBAIMH400005IN |
|
7 |
C78042603 |
10538736 |
SBICAP TRUSTEE COMPANY LIMITED |
23/12/2014 |
02/01/2016 |
- |
11166760000.0 |
202 MAKER TOWER ECUFFE PARADEMUMBAIMH400005IN |
|
8 |
C78249844 |
10538154 |
SBICAP TRUSTEE COMPANY LIMITED |
18/12/2014 |
02/01/2016 |
- |
1054744600.0 |
202 MAKER TOWER ECUFFE PARADEMUMBAIMH400005IN |
|
9 |
C78130648 |
10533586 |
SBICAP TRUSTEE COMPANY LIMITED |
26/11/2014 |
02/01/2016 |
- |
1792751000.0 |
MAKER TOWER ECUFFE PARADEMUMBAIMH400005IN |
|
10 |
C78081692 |
10523906 |
SBICAP TRUSTEE COMPANY LIMITED |
27/09/2014 |
02/01/2016 |
- |
3000000000.0 |
202 MAKER TOWER ECUFFE PARADEMUMBAIMH400005I |
CONTINGENT
LIABILITIES:
|
PARTICULARS |
31.03.2016 INR in Million |
|
Disputed Sales Tax/VAT/ Entry Tax matters in respect which the Company has gone in appeal |
186.800 |
|
Disputed Excise Duty matters in respect which the Company has gone in appeal |
1.700 |
|
Disputed Custom Duty / Export Duty matters in respect which the Company has gone in appeal |
1341.100 |
|
Tax on sale of Electricity demanded by collector of electricity duty on Essar Power Limited |
459.100 |
|
Electricity Duty demand1 |
6090.100 |
|
Wheeling Charges demanded by GETCO2 |
3930.100 |
|
Freight Claim by South East Railway |
1005.300 |
|
Disputed Differential Electricity Duty |
493.900 |
|
Electricity Charges by DGVCL3 |
1925.800 |
|
Disputed Cross Subsidy4 |
3272.800 |
|
Others |
257.800 |
FIXED ASSETS:
· Freehold Land
· Leasehold Land
· Buildings
· Leasehold Building
· Plant and Machinery
· Leasehold Plant and Machinery
· Furniture and Fixtures
· Office Equipment
· Computers
· Vehicles
· Ships and Vessels
· Railway Sidings and Wagons
· Leasehold Railway Sidings and Wagons
· Aircraft
· Software’s
PRESS RELEASES
IS THE ORDINANCE
EMPOWERING RBI THE LAST ACT IN NPA RESOLUTION?
MAY 08 2017
It remains to be seen whether the ordinance to Banking Regulation Act gets the NPA job done where several of RBI’s acronymed processes failed
Over the next fortnight, many state-owned banks, led by the nation’s largest lender State Bank of India, are expected to aggressively push for deep restructuring of some of the large bad assets such as Essar Steel Limited (INR 450000.000 Million) and Bhushan Steel Limited (INR 470000.000 Million), among others. These will be taken up at the executive committee meetings of individual banks and also the forum of lenders. On the table are plans for extension of the tenure of repayment of loans, reduction in interest rates, pledge of shares as well as personal guarantees by the promoters of distressed companies and conversion of unsustainable debt into preference shares/low coupon debentures, and other covenants. Behind the sudden rush is an ordinance signed by the President of India last Thursday, amending the Banking Regulation Act, giving powers to the Reserve Bank of India (RBI) to push the banks hard to deal with the bad assets. The banking regulator is also being authorized to invoke the Insolvency and Bankruptcy Code against the loan defaulters.
If the reaction of the stock market is anything to go by, the ordinance did not match the hype that was created in media in the run up to its promulgation. Are the new proposals adequate to clean up the banking system in the world’s fastest growing major economy? Between 2001 and now, there have been quite a few schemes like corporate debt restructuring (CDR), strategic debt restructuring (SDR) and Sustainable Structuring of Stressed Assets (S4A) to address the problem of rising bad loans in India but none of them has succeeded. The listed Indian banks had Rs7.2 trillion gross bad loans in December and this is expected to cross INR 8 trillion in March. At least another Rs2.1 trillion are the so-called special mention accounts or SMA1 (where principal or interest payment of a loan are not paid between 31-60 days) and SMA2 (principal or interest not paid between 61-90 days).
Three ways in which changes to Banking Act gives RBI more powers tackle NPAs
The Videocon group (INR 330000.000 Million), Essar Power Limited (INR 110000.000 Million), Jaiprakash Associates Limited (INR 229600.000 Million), Jaiprakash Power Ventures Limited (INR 147000.000 Million), JP Infrastructure Limited (INR 100000.000 Million), Naveen Jindal’s Jindal Steel Limited (INR 460000.000 Million) and Anil Ambani’s Reliance Communications Limited (INR 420000.000 Million) are some of the corporations that fall into this bracket. Depending on their cash flow and repayment of banks dues, they shift between the two buckets—SMA1 and SMA2; for the banking system, they are stressed but performing assets.
The finance minister has pegged the stressed asset volume at Rs9.6 trillion but I presume this figure does not include the cases which are under SDR where the banks continue to classify them as standard assets for 18 months. Under SDR, a consortium of lenders could convert part of their loan exposure in a stressed company into equity and own at least 51% of it. They can also change the management of companies that were not able to service bank loans. We have hardly seen change in management in companies dealt on the SDR platform. The stressed companies being tackled on this platform for which new investors are yet to be identified could be around Rs1trillion. There are over-leveraged promoters who have very little skin in the game as they have taken vanilla loans from one set of banks for the holding company and, at the same time, loans against pledge of shares of their operating companies from another set of banks and non-banking financial companies to minimize their own contribution. Similarly, there are banks which have been evergreening certain loans—giving fresh loans to the borrowers to pay off the old loans. This is why one particular account could be in the category of SMA1 or SMA2 or even a non-performing asset (NPA) for one bank and a regular asset for another.
5 charts that show why cabinet cleared ordinance to solve NPA issue
The two key takeaways from the latest move to clean up banks’ sheets are :
—The bank executives are expected to be protected from the glare of the investigative agencies Central Bureau of Investigation, Chief Vigilance Commission and India’s chief auditor, the Comptroller and Auditor General, while taking a deep haircut to resolve some of the bad assets. This is not explicitly stated in the ordinance but this will be done by making the oversight committees or OCs responsible for such resolutions. Currently, there is only one two-member OC—consisting of former State Bank of India chairman Janki Ballabh and former chief vigilance commissioner Pradeep Kumar. Work is underway to amend the Prevention of Corruption Act and once this is done, the formal shield for the bankers from such investigations will be in place.
—Bad loan resolution will now happen in a time-bound manner. If the banks show reluctance, the RBI will force them to act. Frankly, there haven’t been enough incentives for the banks to act on a war-footing against bad loans. Once a loan becomes an NPA, a bank is required to set aside money or provide for 15% of the loan amount in the first year, additional 10% in the second year, 15% in the third year and finally the rest 60% in the fourth year. For a bank chief, making such provisions is easier than taking a 40%-60% haircut at one go. On the one hand, such deep haircuts can attract the attention of investigative agencies and, on the other, higher provisions—following a deep haircut—erodes bank’s profits and capital.
This is why bankers’ lobby Indian Banks’ Association has been asking for staggering out such provisions over a period of eight quarters or two years but it seems that the banking regulator doesn’t have much sympathy for this. However, to hasten the process of resolution it is saying 60% of creditor by value and 50% by number of the lenders will now be the basis of any action for bad loan clean-up. Till now, any such decision needed to be backed by 75% by value and 60% by number of lenders.
This is expected to speed up the process. One of the key reasons why there has been enormous delay in resolving the bad assets is the bankers’ refusal to reach a consensus on such deals. A case in point is Russian oil major Rosneft’s plan to acquire Essar Oil for $12.9 billion. Rosneft plans to acquire a 49% stake and another 49% stake will be shared between commodities trader Netherlands-based Trafigura and Russian private investment group United Capital Partners. Once the deal is done, armed with the cash, the Essar group will be able to service bank loans in a much efficient way but some of the banks which have exposure to the group have not yet given their approval to the deal.
Many are questioning the direct involvement of the banking regulator in the bad asset resolution process. Should the regulator do this? Isn’t there a conflict of interest? If this is done, what prevents the RBI from directing the banks where to lend and return to the directed lending regime? While there is merit in such a debate, we must remember that this is an extraordinary situation which calls for extraordinary measures. The overall stressed assets of the banking system at this point could be as much as Rs12 trillion, more than 8% of India’s gross domestic product. This is less than 15% of bank credit but since bad loans in other sectors such as retail and agriculture is much lower, around 40% of the industrial credit given by Indian banks could have gone sour. We cannot remain in a denial mode.
While an aggressive banking regulator will force the banks to clean up their books, who will fill in the big holes in their balance sheets? Deep restructuring of loans will lead to massive provisions and that will wipe out many banks’ capital. The ordinance marks the beginning of a new cleanup drive but it can only be successful if the government is willing to pump in fresh capital. Or else, quite a few banks will go belly up. Of course, if the RBI has something up its sleeve for mergers and consolidation of banks, that’s a different story.
Post script
While both the regulator and the majority owner are determined to clean up the banking system—and rightly so—the government is showing no laxity in tightening the screw around top loan defaulters that are suspected of wrongdoings. The Serious Fraud Investigation Office (SFIO) of the central government is probing into the affairs of Bhushan Steel Limited and Bhushan Power and Steel Limited. In the last week of April, a senior executive of SFIO, part of the ministry of corporate affairs, wrote to the chiefs of all banks, asking for information of the bank accounts of all group companies and their directors—some 49 of them.
The SFIO wants the copy of the account opening form, the KYC (know your customers) documents submitted by them, and statement of accounts for past 10 years under Section 65B of the Indian Evidence Act, 1872. It also wants the details of demat accounts, linked to the bank accounts, statement of holdings as well as details of all transactions. Besides, it has asked for details of credit cards issued to any of the directors, their family members and senior executives of the companies under investigation and details of their loan accounts.
The banks have been directed to submit all documents—as per provisions laid down by Section 2(A) of the Banker’s Book of Evidence Act, 1891, within seven days. The list of 49 group companies and their directors also include their PAN numbers. I presume, the banks have already responded and the investigation is going on full steam.
This is first of a two-part series on bad loan resolution.
Tamal Bandyopadhyay, consulting editor at Mint, is adviser to Bandhan Bank. He is also the author of A Bank for the Buck, Sahara: The Untold Story and Bandhan: The Making of a Bank.
ESSAR NEEDS TO REPAY LIC TO GET APPROVAL FOR ROSNEFT DEAL
MAY 15, 2017
Life Insurance Corp of India (LIC) will clear Rosneft PJSC’s $12.9-billion acquisition of Essar Oil only after the Essar group pays a part of its dues to the insurer, four people with direct knowledge of the matter, including an LIC official, said.
An approval from Essar Oil’s lenders, including LIC, is a pre-requisite for the transaction to go through, according to Indian rules.
Essar, through two of its group companies, owes at least INR 23000.000 Million to LIC. The state-owned insurer wants Essar to repay its loans or at least pay part of loan so that LIC can classify this debt as a standard asset in its books, said one of the four people cited earlier on the condition of anonymity.
“We wish to make it clear that LIC is in favour of the deal, however, there are concerns to be addressed,” a spokesperson for LIC said in a emailed statement. “LIC has conveyed the concerns to Essar group and Roseneft in a joint meeting. LIC has been following with them through letters but we are yet to get response addressing our concerns.”
The Essar group signed a deal with Rosneft, United Capital Partners and Trafigura Group Pte. in October to sell 98% in Essar Oil. The deal was signed at the Brics (Brazil, Russia, India, China, South Africa) summit in Goa in the presence of Prime Minister Narendra Modi and Russian President Vladimir Putin. The proceeds from this sale were expected to help the group reduce its debt, which director Prashant Ruia had put at around $13.5 billion (INR 864000.000 Million).
The deal which was to be completed by March has been delayed because some lenders are yet to approve the acquisition. Reuters reported on Thursday that apart from LIC, five other institutions - IDBI Bank, Punjab National Bank, Syndicate Bank, Indian Overseas Bank, IFCI Limited – have held up the deal. Reuters also said that Syndicate Bank and Indian Overseas Bank were close to approving the deal, citing people it didn’t identify.
LIC’s key worry stems from the non-Essar Oil part of debt owed to it.
After the deal is closed, some part of the liability will go to Rosneft and Transfigura since they will become the owners. There is no guarantee from Essar how it will repay the other parts of its debt, the second of the four people cited earlier said, declining to be identified.
That’s the key reason why other lenders are taking a long time to give approvals. Debt talks were complicated by the fact that some lenders were also owed money by other Essar group firms, Reuters reported. Essar Steel, for instance is negotiating with lenders to restructure debt.
Essar had first offered to pay LIC immediately after the deal closure. Now it is prepared to pre-pay LIC if required to move forward the deal, said two other people (different from the four cited in the first instance) aware of the matter on condition of anonymity. “Informally, other lenders, are saying that Essar pay them money in advance. In a couple of cases, Essar will pay them before the deal is completed,” said one of the two people.
However, the first person cited in the story, who is directly involved in negotiations, said a written offer conveying Essar’s willingness to pre-pay has not been made to LIC.
“The completion of the transaction was conditional upon receiving requisite approvals and satisfaction of customary conditions. The parties are working towards obtaining the requisite approvals to complete the transaction. We are hopeful that the deal will be completed in the upcoming few weeks,” an Essar group spokesperson said in an emailed response.
Rosneft didn’t reply to an email seeking comments.
WITH LENS ON INR 5
LAKH CRORE OF LOANS, GOVERNMENT TURNS FOCUS ON 50 TOP STRESSED ACCOUNTS
MAY 30, 2017
NEW DELHI: About 50 stressed accounts have been identified as being on the watch list of the government, the Reserve Bank of India and, in some cases, vigilance agencies, according to several officials.
The list includes Videocon Industries Limited; Jindal Group firms such as
Jindal Steel and Power Limited; Punj Lloyd; Jaypee Group; Lanco, which includes
Lanco Infratech; Monnet Ispat; Essar Limited; and Bhushan Steel.
The list represents stressed accounts, which includes loans that have turned bad or been restructured as of December 2016. The total value of such top 50 loans is estimated to be around INR 4-5 lakh crore, which is almost 80-85% of the total bad loans for state-run lenders. Bad loans at state-run banks have grown more than INR 1 lakh crore since April 2016 to INR 6 lakh crore as of December 31.
To be sure, some of these accounts are facing stress but are yet to be classified as a non-performing loan across all lenders. As per RBI classification, some of these accounts also fall under Special Mention Account (SMA) categories 1 and 2, which means interest payment is overdue by up to 90 days.
Some of these names have already been shared with the Prime Minister’s Office in presentations made on resolving non-performing assets (NPAs).
"Inputs have come from lenders and some of these names are a constant both in sectoral stressed assets and stressed assets by value," said a senior government official aware of the deliberations, adding the concern is that this quarter some telecom companies may get included in the list. The debt-heavy sector is struggling to cope with a tariff war amid the entry of Reliance Jio Infocomm.
Earlier this month, two state-run lenders classified the debt of Videocon Industries as NPA.
The government and the banking regulator are keen on resolving NPAs, which are a key risk for economic growth.
Finance minister Arun Jaitley has on various occasions said that the problem of bad loans is not systemic but is limited to 30-50 accounts.
"It is not a problem spread over hundreds or thousands of accounts and given the size of the Indian economy, it is possible to deal with the NPAs," Jaitley said in April during a trip to New York.
Earlier this month, the government promulgated the Banking Regulation (Amendment) Ordinance, 2017, giving more powers to RBI to deal with stressed assets.
Another government official confirmed some of these names and said the
estimated total outstanding exposure in these 50 accounts stands at around INR
4-5 lakh crore. "These are estimates, (and) as some of these are group
accounts, they do not reflect a clear picture as some of the small-value
lending done to standalone units has not been yet captured," he said.
A finance ministry official said most of these accounts are under close scrutiny and steps are being taken to identify the issues and possible remedial measures, which include takeovers by other promoters, extensive restructuring and in, some cases, a forensic audit where there are suspicions of malfeasance.
"The current position is that RBI has reached out to the banks seeking status of some of these accounts. Banks have and continue to explore all possible options," he said, adding that the central bank will try and speed up the process in some cases.
The central government can also direct the Serious Fraud Investigation Office to examine company accounts under Section 212 of the Companies Act, 2013.
ET View Use The Bankruptcy Code Vigil is in order. Having empowered the RBI to give directions to banks to take action against defaulters under the bankruptcy code, and shield bankers from individual accountability for decisions, the need is to swiftly appoint resolution professionals and put the bankruptcy code to use. A clean-up of banks' books will enable better credit flow and revive growth. A change in bankers' remuneration to bring perfor.
SC TELLS ESSAR TO PAY
INR 10382.700 MILLION TO GUJARAT GOVT [READ JUDGMENT].
MAY 3, 2017
The Supreme Court has dismissed the appeal by Essar Steel India Limited against the Gujarat High Court judgment directing it to pay electricity duty amounting INR 10382.700 Million to the Gujarat government.
The State Government’s decision rejecting the claim of the company for exemption of payment of electricity duty and the recovery notice issued for payment of electricity duty for the period of April 2000 to August 2009, was challenged before the Gujarat High Court. Both the single bench and division bench of the Gujarat High Court upheld the government’s decision.
A bench comprising Justice AK Sikri and Justice Ashok Bhushan observed that the statutory provisions of Section 3(2) vii (a) of the Bombay Electricity Duty Act have to be strictly construed and in event the condition of generating energy jointly with any other industrial undertaking is not fulfilled, the claim has to be rejected. “When energy being generated is used by industrial undertaking which is not jointly generating the energy the claim is not covered under Section 3(2) (vii) (b),” the bench said.
“Even if it is held that the appellant no.1 to the extent it holds 42% equity
shares of appellant no.2 is jointly generating the energy. The Gujarat Electricity
Board which has been allocated 58% of electricity generated cannot be said as
the industrial undertaking jointly generating the energy,” the bench added.
The court also observed that the condition which was found lacking for applicability of the notification was that generating sets were not purchased or installed or commissioned during the period from 01.01.1991 to 31.12.1992.
RBI STARTS BANKRUPTCY
PROCEEDINGS: BHUSHAN STEEL, ESSAR STEEL, ALOK INDUSTRIES AMONG LIKELY TARGETS
JUNE 14 2017
A list of likely candidates on which RBI can implement Insolvency and Bankruptcy Code, based on debt size and conversations with bankers
Mumbai: The Reserve Bank of India (RBI) on Tuesday said 12 accounts representing about 25% of the gross bad loans in the banking system would be eligible for immediate reference for bankruptcy proceedings. It used one criteria for shortlisting these accounts: they should have outstanding dues of at least INR 50000.000 Million, of which at least 60% should have been classified as non-performing by banks as of 31 March 2016.
RBI did not name these 12 accounts. Mint has put together a list of likely candidates on which the Insolvency and Bankruptcy Code can be implemented, based on debt size and conversations with bankers. This list will be updated as and when more information comes in.
Bhushan Steel Limited
Lead Bank: Punjab National Bank
Debt: INR 423555.003 Million (as on 31 March 2017); INR 385292.600 Million (as on 31 March 2016)
Interest Coverage Ratio: 0.25 (Fiscal 2017)
Many banks classified this account as a non-performing asset after RBI’s asset quality review in the fourth quarter of FY16. This was done after efforts at resolution, such as joint lender forum (JLF) discussions and a 5/25 refinancing plan, failed. The JLF was set up after the Central Bureau of Investigation (CBI) arrested Neeraj Singhal, vice-chairman of Bhushan Steel, in a cash-for-loans case in 2014. Until recently, lenders were considering restructuring the company’s debt under the RBI’s Scheme for Sustainable Structuring of Stressed Assets, or S4A, which allowed lenders to split the debt into sustainable and unsustainable parts. A company spokesperson declined to comment, saying that it is too early to respond.
Bhushan Power and Steel Limited
Lead Bank: Punjab National Bank
Debt: N.A. (as on 31 March 2017); INR 356840.000 Million (as on 31 March 2016)
Interest Coverage Ratio: N.A. (fiscal 2017)
Just like many other power sector firms, Bhushan Power and Steel has struggled to service its debt. Chairman and managing director Sanjay Singal had sought a deep restructuring of loans but there was no head way. According to 7 June 2017 report of the Economic Times, the Serious Fraud Investigation Office had initiated investigation into the company. Singal did not comment on whether Bhushan Power would be one of the first companies to go for bankruptcy proceedings after RBI was granted powers under the new ordinance.
Essar Steel Limited
Lead Bank: State Bank of India
Debt: N.A (as on 31 March 2017); INR 312110.000 Million (as on 31 March 2016)
Interest Coverage Ratio: N.A (Fiscal 2017)
Essar Steel was declared as a non-performing asset in 2015 and lenders have been making efforts to restructure debt. In October 2016, Essar group sold its oil and Vadinar port assets to a consortium led by Rosneft OAO for INR 860000.000 Million. The deal will help the group reduce its total debt in half and restructure the debt of Essar Steel, Prashant Ruia, a director at Essar group had said then. An Essar spokesperson did not immediately comment on Tuesday night. This copy will be updated with Essar’s response as and when we get it.
Alok Industries Limited
Lead Bank: State Bank of India
Debt: INR 234430.000 Million (as on 31 March 2017); INR 198870.000 Million (as on 31 March 2016)
Interest Coverage Ratio: -0.59 (Fiscal 2017)
Alok Industries was one of the earliest cases which was admitted for restructuring under the CDR scheme. Later the lenders considered restructuring the company under RBI’s new schemes, which failed to be implemented and the account was classified as an NPA. In October 2016, the board of directors gave the approval to the company to approach the Board of Industrial and Financial Reconstruction (BIFR) following an erosion in its net worth by more than 50% from peak levels. This was followed by SIDBI filing a winding up petition in the Bombay high court. A spokesperson declined comment.
BHUSHAN, ESSAR STEEL AMONG THE 12 FIRMS BEING MOVED TO INSOLVENCY COURTS UNDER RBI DIRECTIVE
16.06.2017
Mumbai: The Reserve Bank of India (RBI) has asked lenders to initiate bankruptcy proceedings against a dozen companies, including Essar Steel, Bhushan Steel Limited, Monnet Ispat and Energy Limited, sources with direct knowledge of the matter said.
This follows a change enacted in laws last month that gives the Reserve Bank of India greater power to address the $150 billion stressed loan problem plaguing growth in Asia’s third-largest economy. This week, the RBI said it had identified 12 of the country’s biggest loan defaulters.
Jaypee Infratech, Electrosteel Steels, unlisted Bhushan Power and Steel, textiles maker Alok Industries, ABG Shipyard and Jyoti Structures are also among the firms that will be taken to insolvency courts by the RBI, said the sources, who asked not to be named as the list was not public.
The RBI has yet to officially name any of the 12 companies, which account for about 2 trillion rupees ($31 billion) of India’s non-performing loans, or roughly 25 percent of all the country’s bad loans.
CNBC TV18, which reported the 12 names earlier on Friday, also said Lanco Infratech, Amtek Auto and Era Infra Engineering were on the list. Reuters could not immediately verify these three names.
According to the television station, RBI has asked banks to initiate bankruptcy proceedings against six of the firms within 15 days and to file petitions for the others within 30 days.
A spokesman for Essar Steel declined to comment, while a spokesman for Electrosteel said they had heard from their main lender that creditors wanted to initiate resolution of the unpaid loans through the National Company Law Tribunal.
The NCLT has been appointed as the nodal court for insolvency and bankruptcy proceedings in India. A bankruptcy filing would result in recovering some funds owed through a debt restructuring, or ultimately through liquidation of the company.
Such action means banks would no longer leave bad debt on their books and it could force them to put more money aside to cover losses – at a time when funds are already short as banks seek to comply with international capital standards.
The filings could have far reaching implications, as India’s new insolvency code sets out a tight deadline for restructuring resolutions to be struck, failing which the defaulters would be moved into forced liquidation, potentially leading to further value erosion and jeopardizing tens of thousands of jobs at the heavy industry companies on the list.
Indian banks typically lend larger sums in groups. Lead banks plan to call meetings of the groups over the next two weeks to decide the next course of action, one source said.
Jaypee Infratech, Lanco, Bhushan Steel, Monnet, Bhushan Power and Steel, Jyoti, Era, Amtek, Alok and ABG were not immediately reachable for comments.
NCLT CLEARS WAY FOR
INSOLVENCY PROCEEDINGS AGAINST ESSAR STEEL
Ahmedabad, Aug 2: The Ahmedabad bench of the National Company Law Tribunal (NCLT) admitted an insolvency petition against Essar Steel India Limited (ESIL) on Wednesday, paving the way for insolvency proceedings to commence against a big-ticket defaulter under the newly enacted Insolvency and Bankruptcy Code (IBC), 2016.
The decision comes as a major setback for ESIL, led by the Ruias, which has had a total debt of INR 450000.000 Million on its books for a couple of years now. For lenders, non-performing (NPAs) under ESIL assets crossed INR 320000.000 Million in 2016-17 and were at over INR 310000.000 Million in 2015-16.
The NCLT bench, chaired by Justice Bikki Raveendra Babu, was hearing a petition by lenders, who were represented by State Bank of India and global lender Standard Chartered Bank.
The two banks had independently filed applications to initiate insolvency proceedings against ESIL at the NCLT’s Ahmedabad bench, to recover the NPAs.
Justice Babu rejected Essar Steel’s plea to dismiss the insolvency proceedings and ordered the appointment of the SBI-nominated Satish Kumar Gupta from Alvarez and Marsal India as the Interim Resolution Professional (IRP), as required by the Code.
However, StanChart’s counsel had sought the appointment of Ernst and Young partner Dinkar Venkatasubramanian as the IRP.
180-day deadline
The Interim Resolution Professional will get 180 days to come out with a
resolution for the company to repay the loan, under the terms of the code. The
plan has to be approved by the committee of lenders by a 75 per cent majority
before being filed with the NCLT.
The maximum permitted time is 270 days for such a plan to get approved, failing which a liquidator will be appointed to initiate the liquidation.
Among the lenders, the SBI-led consortium of lenders has a 93 per cent share of the total INR 450000.000 Million outstanding with ESIL. Also, ESIL had defaulted on its guarantee, worth INR 37000.000 Million, to StanChart for one of its subsidiaries in Mauritius, Essar Steel Offshore Limited.
SC RESTRAINS ESSAR
STEEL FROM USING 2.76 LAKH SQ M OF SURAT 'FOREST' LAND
AUGUST 16, 2017
NEW DELHI: The Supreme Court on Monday restrained Essar Steel India Limited, already facing insolvency proceedings, from undertaking any construction activity on the 2.76 lakh square metres of alleged forest land on the outskirts of Surat in Gujarat, estimated to be worth INR 60000.000 Million.
A bench of Justices Madan B Lokur and Deepak Gupta was informed by Essar Steel counsel Mahesh Agrawal that Ahmedabad Bench of National Company Law Tribunal has, on August 2, admitted application for initiation of insolvency process.
Agrawal said that by an interim resolution, a professional has been appointed and the NCLT bench has directed that a moratorium with respect to the institution of suits or continuation of pending suits or proceedings against the corporate debtor.
Taking note of the NCLT proceedings, the apex court bench said: "It would be appropriate, if Essar Steel India Limited ceases of activity in relation to the property in question, otherwise it may incur some liability which may not be enforceable. We make it clear that Essar Steel India Limited will immediately cease any activity with regard to the property in question until further orders."
This order of the SC comes on a petition filed by Farook Shaikh, who through advocate D N Ray, had alleged that the Gujarat HC, though finding the land to be forest land, had erred in not passing any restraint orders against Essar Steel.
"If the HC judgement is allowed to operate, it would allow Essar Steel, in collusion and connivance of the state, to grab 2,76,000 sq mof forest land, worth more than INR 60000.000 Million, and commercially exploit the same by seeking ex post facto approval from the Centre for change of user of the forest land."
ESSAR STEEL INTERIM
RESOLUTION PROFESSIONAL LOOKS TO RAISE INR 25000.000 MILLION
Essar Steel’s IRP Satish Kumar Gupta of Alvarez and Marsal is said to have reached out to lenders including a global structured credit fund in August.
Mumbai: The interim resolution professional (IRP) for Essar Steel Limited is in talks with potential lenders to raise as much as INR 25000.000 Million in priority funding to meet the company’s immediate working capital needs, two people aware of the development said.
Essar Steel’s IRP, Satish Kumar Gupta of global turnaround advisory firm Alvarez and Marsal, reached out to lenders including a global structured credit fund in August to raise the required capital, the two said on condition of anonymity. The fund-raising is being done under the interim funding framework of insolvency proceedings, they said.
Priority funding allows a new lender to come in on the promise that it will be accorded higher priority during the payout phase, once a turnround is effected or the firm is liquidated. In such transactions, existing lenders may cede charge on the assets in favour of a new lender, which has the first right on the firm’s cash flows. This is typically done to ensure the underlying asset quality does not deteriorate till the time a resolution plan is approved and put in place.
In a similar concession last year, a consortium of Essar Steel lenders approved a ‘holding on operations’, which allowed it to plough a part of its revenue back into operations.
Essar Steel owed lenders around INR 450000.000 Million, of which INR 316710.000 Million had become non-performing as of 31 March 2016. The company owes as much as 93% of this amount to a consortium of 22 creditors led by State Bank of India, Mint reported in August.
Responding to a query, a spokesperson for Alvarez and Marsal said, “As a policy, A&M does not comment on client or potential client engagements.”
An SBI spokesperson said: “As a matter of policy, SBI doesn’t comment on any individual account and its treatment.” A request for comment sent to Essar Steel did not elicit a response as of press time.
The Economic Times reported in September that the IRP is seeking INR 10000.000 Million in loans from the company’s existing lenders to keep the firm running, and easing of restrictions imposed by lenders on the use of funds, citing people familiar with the matter.
Essar Steel, one of the 12 cases identified by the Reserve Bank of India for early bankruptcy proceedings, has meanwhile drawn interest from potential suitors. Mint reported in August that Tata Steel is considering buying stressed steel assets, including Essar Steel, which would give the firm a foothold in west India. CNBC-TV18 reported in August that apart from Tata Steel, JSW Steel Limited, ArcelorMittal, SSG International, Posco and Liberty House had informally expressed interest in acquiring a controlling stake in the firm.
BANKS WARY AS IRPS
LOOK TO RAISE FUNDS IN INSOLVENCY CASES
Banks are reluctant to allow interim resolution professionals of NPA accounts to raise interim loans from other lender for fear of losing charge over assets
Mumbai: A month after 11 out of 12 companies came under the management control of interim resolution professionals (IRPs), teething issues have cropped up in the resolution process in areas such as interim financing and the role of the resolution professionals. In particular, lenders are reluctant to allow interim loans from other creditors as they fear losing charge over the assets.
Under the Insolvency and Bankruptcy Code (IBC), a resolution professional, who is appointed to carry out the resolution process, is allowed to raise interim finance and grant rights over the debtor’s property if it is approved by the committee of creditors.
Typically, interim funding is a short-term working capital loan borrowed at a higher interest rate and secured with a first charge on the firm’s assets, giving it priority over other lenders in recovery.
Asset reconstruction companies such as Edelweiss ARC and Phoenix ARC are quoting 15-22% for a six-month interim loan with the right of first charge, said two people aware of the matter.
“Interim funding requirement is around INR 500.000 Million to INR 2000.000 Million for each company. We are looking at cases where we already have prior exposure in these companies,” said Eshwar Karra, chief executive officer, Phoenix ARC Pvt. Limited. However, in cases such as Essar Steel Limited, the IRP is looking to raise at least INR 10000.000 Million.
Lenders are questioning the purpose of borrowing such large amounts as they fear losing control over cash flows, said bankers handling these cases.
They also want to ensure that these funds are not used for any related-party transactions.
“Where is the need for fresh funding when the company has been running without the help of any external funding so far?” asked a senior official of a public sector bank.
“Instead, the resolution professional can reduce the interest payment due to the lenders,” the official added.
In Essar Steel’s case, the resolution professional had also requested its lenders to stop diverting a portion of fund flows towards debt obligations, a practice called tagging, the Economic Times reported on 1 September.
Resolution professionals argue that without interim funding, the company could face the threat of shutting down. Money is needed to preserve the value of the company by running it as a going concern, said a consultant at one of the big four audit firms who is handling bankruptcy cases.
“Despite the priority given to interim finance by the Code, the existing lenders have been extremely reluctant in releasing interim finance,” said a report by EY India on implementing the bankruptcy code. “In case there is an external financier who is ready to provide interim finance, it still has to be approved by the committee of creditors that has not been an easy process. Lenders would need to consider the larger implications of the benefits to be derived via interim finance in the interest of the business – rather than being only concerned about dilution of the security available to them.”
In some cases, lenders are also upset with resolution professionals acting on their own without taking the approval of the committee of creditors, said two people involved in the matter.
That said, lenders are not opposed to interim funding in all cases.
In the Alok Industries Limited case, for instance, the creditor committee has given the approval to raise INR 1500.000 Million as interim funding. The resolution professional is currently negotiating with Edelweiss ARC over the pricing of the loan, according to two people familiar with the matter.
“Lenders need to develop confidence over the RPs and this will come with their performance over a period of time,” said Sitesh Mukherjee, partner at law firm Trilegal.
“Meanwhile, financial creditors should ensure that they do not impede the resolution process,” he added.
LITTLE VICTORY
HERALDS BIG CHANGES IN INDIAN BANKRUPTCY
With the Supreme Court backing the new insolvency code, a warped power equation between debtors and creditors in India is heading for a big shift
The 1997 Asian crisis forced Indonesia to replace a 93-year-old relic with something resembling a modern bankruptcy code. India took another 20 years—and its own $191 billion bad-debt crisis—to get to the same point.
With the country’s top court backing the new insolvency code, a warped power equation between debtors and creditors is heading for a big shift. It remains to be seen if this will allow lenders to take on powerful business families, or if they’ll have to satisfy themselves with wresting assets from troubled minnows.
Take the case of Innoventive Industries Limited, a maker of precision tubes. The Supreme Court recently awarded ICICI Bank Limited a small but important victory against the firm. Not only did the judges dismiss the contention that Innoventive was protected from creditors’ action by a Maharashtra state law, they even refused to accept that its former directors—their rights having been arrogated by a tribunal-appointed insolvency professional—had any business seeking justice in the name of the company.
With about $150 million in unpaid debt, Innoventive’s bankruptcy is a minor event. But the court’s pro-creditor stance has implications for larger insolvencies.
Essar Steel Limited, which is controlled by the billionaire Ruia family, failed in July to stall proceedings against it by Standard Chartered Plc and State Bank of India. Already, an insolvency professional is trying to raise fresh loans to keep the furnaces warm, hardly an easy task for a firm with $5 billion to repay. Still, as the Indian steel industry’s sagging fortunes lift, potential bidders are emerging. The local media have mentioned everybody from Tata Steel Limited to ArcelorMittal (which had its best six months in half a decade) among suitors.
Considering that the bankruptcy code allows only 270 days before mandatory liquidation, it helps everyone—except controlling shareholders—to know that the clock won’t keep getting reset. Even politically connected debtors will have to find better challenges than blaming the government for broken promises, or failed restructuring negotiations. The Supreme Court has made it clear that the only way the tribunal can reject a financial creditor’s bankruptcy petition is if the debtor can prove there was no default. The rest of the sob story won’t count.
All this is a relief for Indian state-run lenders struggling to repair broken balance sheets. However, now that the pendulum is swinging away from debtors, how far will it go in the other direction?
It’s possible that lenders become so emboldened they pull the plug too early, without giving management a fair chance to work out a deal. That’s unlikely, though, considering that the bankruptcy tribunal has yet to demonstrate its efficiency. The first case it brought to a conclusion yielded a recovery rate of just 6% without liquidation—though that controversial resolution has now been appealed.
The judiciary may be trying a bit too hard to make the new law an attractive option for all creditors. On Monday, the Supreme Court asked for an interim resolution plan for Jaypee Infratech Limited, a real-estate developer, to be prepared in 45 days. Homebuyers who parted with their life savings but never got their apartments had halted the proceedings, demanding they be ranked alongside secured creditors.
A 4.5% decline in Jaypee’s shares shows shareholders do expect the court’s involvement to mean more money for homebuyers at their expense. No big deal, maybe, but it’s a little disconcerting that judges who ought to be interpreting the new law are busy implementing it. For the sake of more predictable outcomes, that’s best left to the tribunal.
Twenty years of reforms later, Indonesia’s civil-law-based legal system still doesn’t offer that predictability—so for fixed-income investors and Indonesian companies, Singapore is the preferred destination both to raise money and to welsh on debt. But although the city-state has a much more advanced insolvency regime, it had to tweak its laws in May to allow bankrupt oil-and-gas-linked firms to get fresh funding from lenders who insisted their claims take precedence over previous creditors’ demands.
This is something India needs to do, too. Otherwise, state-of-the-art steel plants will be needlessly mothballed. Bloomberg Gadfly.
EDELWEISS ARC TOPS UP
ESSAR STEEL DEBT WITH RESOLUTION PROCESS UNDERWAY
Financial major Edelweiss Group’s asset reconstruction company has virtually doubled the debt it controls in beleaguered steelmaker Essar Steel.
In a bid to consolidate the debt, Edelweiss Asset Reconstruction Company Limited. bought out INR 20000.000 Million worth of Essar Steel loans from Indian Overseas Bank, two people in the know said.
After the purchase, the total Essar Steel debt under Edelweiss ARC’s control stands at INR 50000.000 Million or around 11 percent, making it the second largest lender in the INR 450000.000 Million consortium, after State Bank of India.
The deal, which concluded on Tuesday, was done at a 40 percent discount to the book value of the loans. ICICI Bank, which sold a portion of its Essar Steel exposure to Edelweiss ARC in June 2016, had taken a 45-50 percent haircut on the loan value, according to the two people quoted above. Other lenders such as Axis Bank, HDFC Bank and Federal Bank have also sold their Essar Steel loans to Edelweiss ARC but the values are not known.
The sale involved paying 15 percent of the deal value upfront and issuing security receipts for the rest.
Edelweiss ARC and Essar Steel declined to confirm the development. IOB spokespersons were not immediately available for comment.
Essar Steel’s Insolvency Process
Essar Steel is one of the largest cases being resolved under the insolvency and bankruptcy process, after the Reserve Bank of India included it in a list of 12 large corporate accounts for immediate action in June.
The case was admitted under the insolvency process to the National Company Law Tribunal and Satish Kumar Gupta was appointed as a resolution professional to manage the case.
Prior to this, banks had been trying various restructuring tools to resolve the stress in the account but with no success.
Under the insolvency process, financial creditors and the resolution professional need to arrive at a viable resolution plan within 180 days. This period can be extended to 270 days, after receiving NCLT approval. If the creditors are not able to come up with a viable plan within this time period, liquidation is triggered and the assets of the company are sold to recover money.
For a resolution plan to be accepted it needs the approval of more than 75 percent of the creditors, after which, an NCLT approval is also needed.
What Explains Edelweiss ARC’s Move?
Under the Insolvency and Bankruptcy Act a resolution process is managed by the resolution professional but controlled by the committee of creditors. The voting share of a creditor depends on the proportion of debt he holds.
Consolidation of loans at a time when the resolution process is underway suggests that an ARC wants to have a larger say in or control of the resolution.
Presently, the creditors in the Essar Steel case have only met once to take on record the facts of the case. According to the two people quoted above, the resolution professional is currently working to collect and verify information regarding the financials of the company. The next meeting is slotted sometime next month, the people confirmed.
As such, Edelweiss ARC has offered to lend INR 8000.000 Million to Essar Steel in the form of interim financing to keep the company’s operations afloat, BloombergQuint had reported earlier this month. The committee of creditors is yet to approve this proposal.
ESSAR GROUP, TATAS,
ARCELORMITTAL EYE DEBT-LADEN ESSAR STEEL
OCTOBER 29, 2017
NEW DELHI: Top global players including Tata Steel, Essar Group and ArcelorMittal are learnt to have submitted bids to acquire debt-laden Essar Steel which is going through the insolvency+ resolution process.
Essar Steel India Limited, an integrated steel producer with an installed capacity of 10 million tonne per annum (MTPA) is undergoing Corporate Insolvency Resolution Process (CIRP) under the provisions of Insolvency and Bankruptcy Code.
The expression of interest (EoI) for the company was invited by October 23.
"Essar Group has submitted EoI for Essar Steel. A resolution plan will be submitted to IRP within the scheduled time frame," an Essar Group Spokesperson said.
Asked about the rationale for bidding, the spokesperson said IBC allows promoters to bid for their company at the NCLT and there are no limitations.
He added that the entire process is on purely commercial basis and the final selection is done based on the highest bid offered for the NCLT Company.
"This practice of promoters being permitted to bid in bankruptcy/insolvency cases is prevalent in the US, UK and many developed and developing countries," the spokesperson said.
Meanwhile, a source said: "Essar Group, participating in the bid has submitted EoI for Essar Steel along with a letter of comfort from Russia's VTB capital which is a financial services company. It is the investment arm of the VTB group.
A global financial services provider, the VTB group comprises over 20 credit institutions and financial companies operating across all key areas of the financial markets.
The group operates a large international network and the majority shareholder of the VTB Bank is the Russian government, which owns 60.9 per cent of the voting shares.
When contacted with regard to participation in the bid, a Tata Steel spokesperson said, "We keep looking at these options, these are all stressed assets in the country. And as a process... we keep looking at these assets."
A query sent to world's largest steelmaker ArcelorMittal, however, remained unanswered.
A Vedanta spokesperson, when asked in this regard, said the company has not shown any expression of interest.
Essar Steel is among the largest single location steel producers with a 10 MTPA liquid steel capacity. Besides, it has beneficiation and pellet making capacity of 20 MTPA spread across Vizag and Paradeep.
The company said it has made gross investment of over INR 50000.000 million to set up the facilities. Besides, shareholders have infused equity of over INR 160000.000 million till date.
It employs approximately 4,500 persons directly and more than 30,000 people indirectly.
Among state-owned firms, when contacted, a SAIL spokesperson, denied having any knowledge of the steel PSU submitting any expression of interest.
Steel Minister Chaudhary Birender Singh had last month, when asked about plans for PSUs acquiring stressed assets of companies in the sector recommended for insolvency, had told PTI that "As far as stressed assets are concerned, only a few companies are from the steel sector... One of the PSUs made request (for acquiring) to the Finance Ministry in this regard."
Promoted by Ruias, who recently exited Essar Oil, Essar Steel was among the initial 12 companies identified by the Reserve Bank of India (RBI) for insolvency proceedings.
Led by SBI, lenders in June this year had decided to begin insolvency proceedings against Bhushan Steel, Essar Steel and Electrosteel Steels by referring them to the National Company Law Tribunal (NCLT) for recovery under IBC.
The decision was
taken at a marathon meeting chaired by the State Bank of India.
Essar Steel owes about INR 450000.000 million to lenders.
LENDERS SEEKING TO
EXTEND DEADLINE FOR ESSAR STEEL RESOLUTION PLANS - REPORT
15 DECEMBER 2017
Bloomberg Quint, citing to two people familiar with the matter, reported that lenders are looking to extend the deadline for submission of final resolution plans in the case of Essar Steel Ltd. The sources told “Additional time is needed both for potential bidders to complete due diligence and for existing promoters to reassess their plans in light of recent amendments to the Insolvency and Bankruptcy Code.”
The report quoted a source as saying that “Committee of Creditors will now approach the NCLT for permission.”
The person added that the amendments to the IBC have necessitated the extension in timeline.
The sources added “Essar Steel’s promoters are still weighing their options.It is tough to say at this stage whether they would challenge the ordinance or clear their over dues in order to participate in the resolution process.”
An insolvency petition against Essar Steel was admitted by the Ahmedabad bench of the National Company Law Tribunal on August 2. The IBC lays down a 180-day timeline within which a resolution plan has to be finalized. This can be extended by a maximum of 90 days. The Committee of Creditors had approved an extension of the timeline
Satish Kumar Gupta, the resolution professional in Essar Steel, had sought expressions of interest for the company by October 23. On Oct 24, BloombergQuint reported that ArcelorMittal, Sumitomo Corporation, Vedanta Resources Plc, Tata Steel Ltd. and Steel Authority of India Ltd. have submitted expressions of interest for a resolution plan. The Ruias, who are the promoters of Essar Steel, had also shown interest.
VISAKHAPATNAM:
48-HOUR COUNTDOWN STARTS FOR ESSAR
DECEMBER 22, 2017
Visakhapatnam: Acting tough on non-payment of dues against the shortfall of traffic, Railways on Thursday gave an ultimatum of 48 hours to deposit and clear the remaining dues on or before December 23. Railways has warned that it would not permit the continuance of slurry pipeline on their land in absence of an appropriate agreement. M/S ESSAR steel India Limited is operating an Iron Ore slurry pipeline crossing a railway track at KM.762/1-2 near Duvvada since 2005. ESSAR was committed to give traffic of 1.2MT (annually) but could not keep up the offer and kept a huge sum pending. The total amounted to INR 3724.400 million.
As per the minimum traffic clause, the party has to pay the load amount for whatever amout was agreed in the deal irrespective of what ferried. Divisional Railway Manager (Waltair division) M.S. Mathur told this newspaper that the agreement with Essar Steel was till 2012. They had to renew the contract and clear their dues. But, even after serving several notices, the firm did not respond. This is an illegal operation being carried out by them and we have every right to remove their infrastructure and stop our services.”
“Railways may not insist on the minimum traffic clauses from 2016. However, the agreement with the Essar was till 2012. Railways invested huge investment to offer the service. So, Railways would not permit the continuance of slurry pipeline on their land in absence of an appropriate agreement,” he said. Railways geared-up to initiate action against the non-payers towards shortfall of Minimum Guaranteed Traffic payable by ESSAR for the period 2014-2017. Railways advised for early payment of pending dues towards shortfall of assured traffic during the period 2014-2017 (3Years).
In this connection, Railway issued one week prior notice to INR 500.000 million as first installment and the remaining amount in a week and now 48 hours’ notice to ESSAR steel India limited duly emphasising to the clear the payment of dues against shortfall of the traffic, for deposition of INR 500.000 million towards part payment of outstanding dues along with action plan for deposition of balance sum within a week time from date of this notice.
CMT REPORT (Corruption, Money Laundering & Terrorism]
The Public Notice information has been collected from various sources
including but not limited to: The Courts,
1] INFORMATION ON
DESIGNATED PARTY
No exist designating subject or any of its beneficial owners,
controlling shareholders or senior officers as terrorist or terrorist
organization or whom notice had been received that all financial transactions
involving their assets have been blocked or convicted, found guilty or against
whom a judgement or order had been entered in a proceedings for violating
money-laundering, anti-corruption or bribery or international economic or
anti-terrorism sanction laws or whose assets were seized, blocked, frozen or
ordered forfeited for violation of money laundering or international
anti-terrorism laws.
2] Court Declaration :
No records exist to suggest that subject is
or was the subject of any formal or informal allegations, prosecutions or other
official proceeding for making any prohibited payments or other improper
payments to government officials for engaging in prohibited transactions or
with designated parties.
3] Asset Declaration :
No records exist to suggest that the property or assets of the subject
are derived from criminal conduct or a prohibited transaction.
4] Record on Financial
Crime :
Charges or conviction
registered against subject: None
5] Records on Violation of
Anti-Corruption Laws :
Charges or
investigation registered against subject: None
6] Records on Int’l
Anti-Money Laundering Laws/Standards :
Charges or
investigation registered against subject: None
7] Criminal Records
No
available information exist that suggest that subject or any of its principals
have been formally charged or convicted by a competent governmental authority
for any financial crime or under any formal investigation by a competent
government authority for any violation of anti-corruption laws or international
anti-money laundering laws or standard.
8] Affiliation with
Government :
No record
exists to suggest that any director or indirect owners, controlling
shareholders, director, officer or employee of the company is a government
official or a family member or close business associate of a Government
official.
9] Compensation Package :
Our market
survey revealed that the amount of compensation sought by the subject is fair
and reasonable and comparable to compensation paid to others for similar
services.
10] Press Report :
No press reports / filings exists on
the subject.
CORPORATE GOVERNANCE
MIRA INFORM as part of its Due Diligence do provide comments on
Corporate Governance to identify management and governance. These factors often
have been predictive and in some cases have created vulnerabilities to credit
deterioration.
Our Governance Assessment focuses principally on the interactions
between a company’s management, its Board of Directors, Shareholders and other
financial stakeholders.
CONTRAVENTION
Subject is not known to have contravened any existing local laws,
regulations or policies that prohibit, restrict or otherwise affect the terms
and conditions that could be included in the agreement with the subject.
FOREIGN EXCHANGE RATES
|
Currency |
Unit
|
INR |
|
US Dollar |
1 |
INR 63.72 |
|
|
1 |
INR 88.64 |
|
Euro |
1 |
INR 78.14 |
INFORMATION DETAILS
|
Information
Gathered by : |
KMN |
|
|
|
|
Analysis Done by
: |
PRY |
|
|
|
|
Report Prepared
by : |
NKT |
SCORE FACTORS
|
DEMERIT POINTS |
|
|
|
--BANK CHARGES |
YES/NO |
YES |
|
--LITIGATION |
YES/NO |
NO |
|
--OTHER ADVERSE INFORMATION |
YES/NO |
NO |
|
MERIT POINTS |
|
|
|
--SOLE DISTRIBUTORSHIP |
YES/NO |
NO |
|
--EXPORT ACTIVITIES |
YES/NO |
NO |
|
--AFFILIATION |
YES/NO |
YES |
|
--LISTED |
YES/NO |
NO |
|
--OTHER MERIT FACTORS |
YES/NO |
YES |
RATING EXPLANATIONS
|
Credit Rating |
Explanation |
Rating Comments |
|
A++ |
Minimum Risk |
Business dealings permissible with minimum
risk of default |
|
A+ |
Low Risk |
Business dealings permissible with low
risk of default |
|
A |
Acceptable Risk |
Business dealings permissible with
moderate risk of default |
|
B |
Medium Risk |
Business dealings permissible on a regular
monitoring basis |
|
C |
Medium High Risk |
Business dealings permissible preferably
on secured basis |
|
D |
High Risk |
Business dealing not recommended or on
secured terms only |
|
NB |
New Business |
No recommendation can be done due to
business in infancy stage |
|
NT |
No Trace |
No recommendation can be done as the
business is not traceable |
NB is stated where there is insufficient information to facilitate rating. However, it is not to be considered as unfavourable.
This score serves as a reference to assess
SC’s credit risk and to set the amount of credit to be extended. It is
calculated from a composite of weighted scores obtained from each of the major
sections of this report. The assessed factors are as follows:
·
Financial
condition covering various ratios
·
Company
background and operations size
·
Promoters
/ Management background
·
Payment
record
·
Litigation
against the subject
·
Industry
scenario / competitor analysis
·
Supplier
/ Customer / Banker review (wherever available)
This report is issued at
your request without any risk and responsibility on the part of MIRA INFORM
PRIVATE LIMITED (MIPL) or its officials.