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Auctioning assets is usually the last resort - Mr Neeraj Singal of BSL

Steel News - Published on Wed, 06 Dec 2017

Image Source: bhushan-group.org
Economic Times reported that Mr Neeraj Singal, vice chairman of the debt-ridden Bhushan Steel Limited told ET in an interview that maker auctioning assets is usually the last resort and it does not capture the best value for the business. Mr Singal also said that banks should have given him a chance to restructure the company as it has not undergone any restructuring in the last 30 years.

Edited excerpts:

Q- There are many suitors for your company. How do you view this?

A - Bidders seem to be interested in only two companies—Essar Steel and Bhushan Steel. However, there are thousands of others NPAs across small and medium-sized firms which face uncertain future. There are likely to be severe job losses across the sector.

Q - Did you have the resources to bid and win back the company if the rules had not been changed?

A - We would have definitely tried some way to get resources and claw back into the company.

Q - The government has clarified if promoters clear the dues they can bid. Does this satisfy you?

A - I think we should have been given a chance at restructuring. We have not undergone any restructuring in the last 30 years of operation. A number of companies including Tata Steel, JSW Steel and SAIL have also faced problems. In my view, the RBI-led process of deep restructuring under Sustainable Structuring of Stressed Assets (S4A) should be brought under NCLT. If it fails to come up with a solution, only then the auction process should be initiated. Elsewhere in the world, in the UK and the US, restructuring with existing promoters is the first option that is tried out. Auctioning off is usually the last resort and it does not capture the best value for the business. A promoter puts his sweat equity into building the asset and is considered to be the best bidder. That aspect of the law has been cast aside. Companies are being sold off at liquidation value, which is giving low value. Banks will not get maximum value in the process. Instead, they should be sold at business value and replacement cost.

Q - Are you planning a legal challenge?

A - That could have been one of the options but we are not considering such an option. It is an emergency like situation. We do not have the time for that.

Q - Wilful defaulters and persons who have diverted funds have been barred. What are your views?

A - I am fully with this decision. I think wilful defaulters should be barred. It is very important to make a distinction between a defaulter and a wilful defaulter. The whole issue hinges on this aspect. The reasons for the default need to be understood. While steel is a cyclical business, de-allocation of our coal block led to disastrous consequences. We have to buy coal at INR 4,000 per tonne instead of getting it at INR 800 from captive sources. We could have set up the plant at Maharashtra or on the coast in Gujarat. We do not sell much in Odisha but went there only because we were assured of the raw material. We bought land in 2006 and started constructing the plant, one year after getting coal and iron ore linkages. We also spent INR 800 crore on developing the Parbatpur coal block, which got de-allocated and remains closed. Along with other steel making players, we also faced huge competition from cheap steel imports for nearly two years before the government decided to take protective steps like MIP, anti-dumping duty and safeguard the steel sector.

Q - How is the company faring now?

A - It is operating but not performing to the extent it should have been. It is doing about 0.8 to 0.9 million tonnes per quarter. This translates to around 3.5 million tonnes per annum. The plant's capacity utilization is around 70%. Ideally, it should have been at 80-85%. The main problem is that the 1.8 million tonnes of coal-based DRI capacity is lying idle. Current EBITDA is INR 600-700 crore per quarter.

Q - Have PE firms and other steel firms reached out to you to make a bid?

A - A number of potential investors had approached us and we have been trying to talk to them. But after this Ordinance, we are not in a position to continue those talks. Investors need clarity and confidence to decide their moves. We do not have access to the board, so who do they talk to?

Q - If you can't bid, what next?

A - I don't know. Our lives have been built around the business and this company. In this situation, it will be very difficult to approach creditors and start anew.

Source :

Posted By : Rabi Wangkhem on Wed, 06 Dec 2017
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