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The National Company Law Tribunal (NCLT) on Tuesday approved Vedanta Ltd’s bid to acquire the bankrupt Electrosteel Steels Ltd (ESL).
ESL was one of the first 12 cases referred by the RBI for resolution under the Insolvency and Bankruptcy Code (IBC). It is also the first major stressed company cleared for takeover as a going concern.
Vedanta has offered to pay ₹5,320 crore for the distressed Kolkata-headquartered company, which has a total debt of close to ₹13,000 crore. ESL’s integrated steel plant at Bokaro in Jharkhand has a capacity of 1.5 million tonnes, with the potential to increase this to 2.5 million tonnes. The Division Bench, comprising Justice Jinan KR and Justice Madan Balachandra Gosavi, in its order on Tuesday said the approved resolution plan (RP) “shall come into force with immediate effect”.
“The resolution plan meets all the requirements to be complied under the provisions of the code and regulation. The technical and economical viability of the resolution applicant in taking over the company is not at all a challenge from any corner,” the order said.
According to a stock market notification, a wholly-owned subsidiary of Vedanta will infuse ₹1,805 crore in equity and ₹3,515 crore as debt in ESL. Upon implementation of the resolution plan, Vedanta will hold approximately 90 per cent of the paid-up capital of Electrosteel Steels. The rest will be held by ESL’s existing shareholders and financial creditors.
The acquisition will be complete after approval by the Competition Commission of India and market regulator SEBI, the company said. According to a source, it might take up to two months to get the requisite approvals. Until then a committee of Vedanta and creditors will run ESL.
Objection overruled
The division bench dismissed bidder Renaissance Steel India’s application that Vendanta was not an ‘eligible bidder’ for the insolvent ESL. Renaissance pointed out that as per section 29A of IBC, which bars a company convicted of criminal misconduct, Vedanta was not an eligible bidder as its group company Konkola Copper Mines was guilty of flouting pollution norms in Zambia.
The court held that the “imprisonment disqualification” clause is not applicable to Vedanta as there was no imprisonment.
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