Mining billionaire Anil Agarwal-led Vedanta Ltd said on Tuesday that its Rs 5,320 crore ($812.6 million) resolution plan for the acquisition of debt-ridden Electrosteel Steels Ltd has been approved by the National Company Law Tribunal (NCLT).
This makes Electrosteel the first of the 12 large stressed assets identified by the Reserve Bank of India last year to be resolved under the Insolvency and Bankruptcy Code.
Vedanta had announced last month that it had won the bid to acquire bankrupt Electrosteel, trumping competition from Tata Steel Ltd, Renaissance Group and Edelweiss Asset Reconstruction Co Ltd.
In a stock exchange filing on Tuesday, Vedanta said the Kolkata bench of the NCLT had approved the terms of its resolution plan for Electrosteel.
A wholly-owned subsidiary of Vedanta will subscribe to the share capital of Electrosteel for Rs 1,805 crore ($275.7 million) and provide additional funds of about Rs 3,515 crore ($536.9 million) by way of debt, the filing said.
Vedanta will hold about 90% of the paid-up share capital of Electrosteel while the remaining 10% will be held by Electrosteel's existing shareholders and the financial creditors, who will receive shares in exchange for the debt owed to them.
In all, Electrosteel’s creditors will receive dues to the tune of Rs 5,320 crore ($812.6 million), Vedanta said.
Competition Commission of India (CCI) and Securities and Exchange Board of India (SEBI) will now need to approve the transaction.
Electrosteel owns and operates a greenfield integrated steel manufacturing plant near Bokaro in Jharkhand with a capacity of 1.5 million tonnes per annum (MTPA). It was incorporated in Ranchi, Jharkhand, as a public company in December 2006 and has been listed on the Indian stock exchanges since 2010.
Electrosteel’s total secured outstanding debt was Rs 12,376.61 crore as on 31 March 2017, according to its annual report.
The company owes lenders more than Rs 13,000 crore ($2 billion), according to a Bloomberg Quint report.
Electrosteel Steels’ resolution professional was slapped with a penalty last week for neglecting the claims made by operational creditors.
Vedanta said the transaction will complement the group’s existing iron ore business through vertical integration of steel manufacturing. It will pay for the acquisition using existing cash resources.
Vedanta Ltd's parent Vedanta Resources Plc is listed on the London Stock Exchange and produces aluminium, copper, zinc, lead, silver, iron ore, oil and gas and energy. It has operations in India, Zambia, Namibia, South Africa, Ireland and Australia.
On Monday, Vedanta announced the appointment of Srinivasan Venkatakrishnan of Johannesburg-based AngloGold Ashanti Ltd as chief executive officer effective August 31 this year. He will succeed interim CEO Kuldip Kaura.