Bankers to troubled Bhushan Steel Ltd on Monday swept in with a slew of measures to “take stricter control” of the steel maker and decided to conduct forensic and concurrent audits of the company as well as appoint three nominee directors on its board.
The decision was taken at a meeting of the consortium of banks led by Punjab National Bank and officials of Bhushan Steel after the Reserve Bank of India drew up a Corrective Action Plan.
Over 51 lenders, including State Bank of India, have a combined exposure of over Rs 40,000 crore in the steel maker.
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The banks have been concerned over their loans to the company after the arrest of Bhushan Steel vice chairman and managing director Neeraj Singal by the CBI in an alleged cash-for-loan scam involving Syndicate Bank chairman SK Jain.
The forensic audit, to be conducted by a reputed audit firm, will examine if the company used loans for the right purposes or if there was a diversion of funds, said a Punjab National Bank statement after the meeting.
Meanwhile, the concurrent audit would be conducted to monitor the cash- flow on a daily basis, the release said.
Banks have also decided to appoint an independent engineer to monitor the manufacturing operations of the company and its ongoing expansion activities while to overcome the tight cash situation, they also asked Bhushan Steel to deleverage by bringing in equity, including monetising non-core assets.
“However, the company requested for some time given the prevailing circumstances. Since the equity infusion will take time, lenders advised the company to monetise the non-core assets which was agreed to by the company as a part of deleveraging exercise and the company was also advised to come up with a definite time frame,” it said.
Amid demands of change in management of the company, the statement said that bankers reviewed the performance and took cognisance of satisfactory operations of the company.
“The company confirmed that its professional management is still intact as on date and the operations of the company are running normal,” the release said.
Bhushan Steel is one of the largest manufacturers of auto-grade steel in the country and also has the largest cold rolled steel plant.
It has, however, been on the radar of its lenders since the CBI arrests.
State Bank of India, which has an over Rs 6,000 crore exposure to the company had earlier this month also said it would press for an external agency to take over the day-to-day management of the company.
“We will try to bring in a management agency to look at the day-to-day running of Bhushan Steel. This is a very good quality asset, it is running properly and we don’t want it getting into any kind of trouble,” State Bank of India chairperson Arundhati Bhattacharya had said on August 9.
On Monday, shares of Bhushan Steel fell 4.98 per cent on the Bombay Stock Exchange to close at Rs 152.50 apiece.