NCLT clears Tata Steel's ₹32500-crore resolution plan for Bhushan Steel

At 1.20pm Tata Steel shares were up 3.85% at Rs633.60 on BSE while Bhushan Steel shares rose 4.81% to Rs23.95

Tata Steel's subsidiary Bamnipal Steel Limited will acquire the majority equity of Bhushan Steel Limited.

In a regulatory filing, Bhushan Steel said that the funds received from the investment will be to the tune of 35,132.58 crores and will be used to settle the existing debts of the company. This is reportedly Tata Steel's second-biggest acquisition after the Corus Group acquisition in 2007. It had a liquidation value of Rs 14,541 crore. "The Resolution Plan also requires financial creditors to invoke pledge on existing equity shares of BSL". At the end of January, BSL promoter and vice chairman Neeraj Singhal had sought to halt the process by writing to lenders and asking them to consider restructuring the company's debt under the sustainable structuring of stressed assets (S4A) mechanism by dividing the debt into sustainable and unsustainable parts, with no haircut.

Tata Steel would also be infusing Rs9,000cr in the form of an inter-corporate loan, which would have the option to be converted to equity.

It further added: "Pursuant to the resolution plan, Bamnipal Steel would invest in, and acquire control of, the company on closing date".

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NCLT also dismissed the plea of engineering major L&T, an operational creditor of BSL, which had requested for a higher preference in recovery of debt on par with the financial creditors of the corporate debtor.

However, some employees of Bhushan Steel had challenged it before NCLT contending that Tata Steel was not eligible under section 29 (A) of the Insolvency and Bankruptcy Code (IBC). Perhaps, this step will help reduce litigation drama for bankruptcy cases going forward. It has also rejected Bhushan Energy's plea to continue its power purchase agreement with the debt-ridden Bhushan Steel.

Under the plan, Tata Steel will pay about Rupees 352 billion ($5.21 billion) to Bhushan Steel's creditors. With Tata Steel tipped to enter into a joint venture with ThyssenKrupp of Germany for its European steel business, the focus is clearly back on growth in India. The company had posted a loss of over Rs 1,100 crore in the year ago period, but the poll predicts a consolidated net profit of over Rs 2,500 crore this time round.

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