Lenders, led by Punjab National Bank, on Friday decided to initiate proceedings against Bhushan Power & Steel under the Insolvency and Bankruptcy Code. Banks will move the National Company Law Tribunal to recover their money within a month. On Thursday, banks had decided to take Bhushan Steel, Essar Steel and Electrosteel Steels to NCLT for insolvency proceedings.
Bhushan Power which has a debt of over Rs 37,000 crore is controlled by Sanjay Singal, brother of Neeraj Singal who is the MD of Bhushan Steel. Both are functioning as separate entities following a split in the family.
Bhushan Power did not respond to an email from The Indian Express seeking clarifications on the bankers move to take the company to NCLT.
The decision of the joint lenders’ forum (JLF) follows a directive by Reserve Bank of India (RBI) on June 13 to banks asking them to refer 12 troubled companies with a combined debt of close to Rs 2.5 lakh crore to the NCLT.
Banks had earlier decided to take Essar Steel, Bhushan Steel, Electrosteel Steels, Jyoti Structures, Lanco Infratech, Monnet Ispat and JP Infratech to NCLT.
The 12 accounts identified by the central bank are those in which banks have an exposure of more than Rs 5,000 crore, more than 60 per cent of which has been recognised as non-performing assets (NPAs).
Once the case is referred to the NCLT under the Insolvency and Bankruptcy Code, an interim insolvency professional is appointed and will take control of the assets and form a creditors committee. The committee will appoint a resolution professional to oversee the process and could change management of the debtor. The committee also has to come up with a resolution plan (approved by 75 per cent majority of the creditors) or decide to liquidate the assets. If the resolution plan is not accepted by the NCLT or no plan is formed within 180 days (it can be extended by 90 days), the company would go into liquidation.
Bhushan Power reported a net loss of Rs 2,433 crore in FY16 on revenues of Rs 8,491 crore. Its gross debt stood at Rs 37,248 crore in FY16, up from Rs 33,785 crore in the previous fiscal.
New Delhi-based Bhushan Power & Steel is privately held with promoters owning 94.4 per cent shares and rest owned by foreign institutional investors. The company has plants located in five locations in northern and eastern India.