With banks planning to take up debt-laden Monnet Ispat & Energy for corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code, 2016, the company’s shares surged on the bourses.
The stock closed higher by 16.94 per cent to Rs 35.20 on the BSE on Tuesday. Among other companies which are facing bankruptcy action, Bhushan Steel rose by 8.91 per cent and Amtek Auto by 9.17 per cent.
Lenders are likely to explore the process of resolution of the company’s non-performing assets (NPAs) through various options. Once the case is referred to the National Company Law Tribunal 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.
Monnet which has a debt of over Rs 12,000 crore posted a loss of Rs 1,733 crore and a revenue of Rs 1,375 crore in fiscal March 2017. For the March quarter, the loss was at Rs 459 crore and revenue Rs 384 crore. While the promoter holding in the company is 25.27 per cent, banks hold a sizeable stake.
According to a bank official, all the 12 cases identified by the RBI will be taken up by the lenders in the coming days following the regulator’s directive. The Internal Advisory Committee (IAC) of the RBI recommended for IBC reference 12 accounts with fund and non-fund based outstanding amounts in excess of Rs 5,000 crore, with 60 per cent or more (Rs 3000 crore or more) classified as non-performing by banks as on March 31, 2016.
Meanwhile, in Delhi, steel minister Chaudhary Birender Singh ruled out any possibility of public sector Steel Authority of India Ltd (SAIL) taking over Monnet Ispat. When asked about SAIL’s plans to take over Monnet Ispat, the minister said “why should we (SAIL) take it”. Talking to reporters on the sidelines of an event on Monday, Singh, however, said that steps are being taken to resolve the stress in the sector.
In March, an official had said that the government was examining the possibility of SAIL undertaking ‘operation and maintenance’ of ailing Monnet Ispat till the lenders find a buyer for the company. “We (steel sector) are now about 28 per cent of the stressed debt but for last about 6-8 months, there is smooth repayment… If the new methodology is to be applied for six top defaulters then let us see what it comes out,” the steel minister said yesterday.
IDBI Bank has already started insolvency resolution process against Lanco Infratech Ltd on Monday following a directive from the RBI. Steel companies account for 50 per cent of 12 large corporate defaulters identified by the Internal Advisory Committee of the RBI for insolvency proceedings.