TATA Steel buys 72% share in Bhushan steel for a whopping INR 35,200 Crores.
Tata Steel has announced its acquisition of Bhushan Steel (BSL) through its wholly-owned subsidiary Bamnipal Steel Ltd (BNPL), completing the resolution of the first case under the Insolvency and Bankruptcy Code (IBC), 2016.
Tata Steel said in a press statement that it has taken a controlling stake of 72.65% in BSL and paid the admitted corporate insolvency costs and employee dues, as required under IBC. Further, settlement of amounts equivalent to Rs35,200 crore towards financial creditors of BSL is being undertaken, and Rs1,200 crore will be paid to the operational creditors of BSL over a period of 12 months, said the statement.
Meanwhile, Neeraj Singhal, former vice-chairman and managing director of Bhushan Steel, has moved the National Company Law Appellate Tribunal (NCLAT) seeking a stay on the takeover by Tata Steel. Mint has learnt that Singhal, a member of the family of the original promoters, also wants to prevent his equity from being transferred to Tata Steel. As of March, the old promoter group owned 43.9% of the equity in publicly-listed BSL.
Tata Steel’s legal team has filed a caveat, a pre-emptive application that the court will not pass an order on this appeal without hearing the company.
This is not the first of unforeseen delays for Tata Steel. The firm has already fended off litigation from Larsen & Toubro Ltd, one of Bhushan’s operational creditors, and BSL’s employees.
Dismissing these cases, on Tuesday the National Company Law Tribunal (NCLT) approved Tata Steel’s takeover of BSL.
The delays in its takeover bid have led to corporate governance issues at the plant, with the senior management hinting earlier to Mint that there might be cases of under-invoicing and contracts being awarded to people known to the erstwhile promoter.
A spokesperson for Tata Steel said that employees of the company have moved into key locations of BSL on Friday, including Khopoli, Dhenkanal and Sahibabad, wresting physical control of plants before NCLAT hears Singhal’s plea on Monday.
The investment in BSL through BNPL has been done through a combination of equity of Rs158.89 crore and an inter-corporate loan of Rs34,973.69 crore. Additionally, Rs100 crore has been paid by BNPL to the financial creditors of BSL to repay old debt.
The acquisition is being financed through a combination of external bridge loan of Rs16,500 crore availed by BNPL, with the remaining Rs18,700 crore coming in the form of equity infusion by Tata Steel in BNPL. The bridge loan availed by BNPL is expected to be replaced by debt raised at BSL over time.
Nominees of BNPL have been appointed on the board of BSL and the existing directors of BSL are deemed to have resigned from its board, according to the terms of the approved resolution plan.
BNPL shall be classified as the “promoter” of BSL, and the existing promoters/promoter group re-classified as public shareholders of BSL, according to the resolution plan approved by NCLT.