Creditors have given Essar Steel India Ltd till the end of June to find a buyer for a majority equity stake in the company, said two people familiar with the matter.
If that doesn’t happen, the banks will find a buyer themselves, the two added, asking not to be identified.
Loans to Essar Steel, which is controlled by the Ruia family, are among a large pile of bad loans banks are trying to clean off their balance sheets.
Essar Steel said in November that it had around Rs.30,000 crore of debt on its books.
“The message has been communicated to the promoters that we cannot keep waiting. If they are unable to close a deal by June, then banks may have to drive this sale,” said a senior official at a large state-owned bank.
A spokesperson for Essar Steel denied the existence of an ultimatum.
“We deny your information. Essar Steel had initiated a process to induct a strategic partner, and in this connection, SBI Caps and ICICI Securities were appointed. We are not aware of any independent process that the banks propose to run to search for a strategic partner in absence of any suitable buyer. Essar Steel has not sought any additional financial assistance,” the spokesperson said in an email response.
In November 2015, Essar Steel mandated SBI Capital Markets Ltd and ICICI Securities to find a strategic investor, but a deal is yet to be closed.
The Essar Steel spokesperson said the process of finding a strategic partner is underway.
A number of banks have already classified Essar Steel as a non-performing asset (NPA) in the October-December period. In an interview on 17 March, Jatinder Mehra, director at Essar Steel, admitted as much.
“We are generally standard, but there are a few banks where technically we have been made an NPA because of the guidelines issued by the Reserve Bank of India. Otherwise, by and large, the account is standard,” said Mehra.
Bankers have been meeting debt-laden companies, including Essar Steel, on a regular basis. During an all-lender meeting that took place in March, representatives from a number of banks met with promoters of several steel companies that fall under this category, including Bhushan Steel Ltd, Uttam Galva Ltd and Essar Steel.
Following the meetings, bankers communicated the kind of action they would like promoters to take. In most cases, bankers are asking promoters to either bring in more equity or induct strategic partners.
The other option for the banks is to find buyers for their loans to the firm but this could prove difficult. On 25 April,Mint reported that Standard Chartered Plc was looking to sell some parts of its offshore loan book, which included loans to Essar Steel.
Source: Livemint.com