Electrosteel Steels Ltd (ESL) has defaulted paying interest on its ₹9,000-crore loan borrowings from banks. The lenders, who are in favour of a proposal from Tata Steel for takeover of the financially-stressed company, have recently taken on record the development.
For the 27-bank consortium, led by SBI, the borrowings have technically turned non-performing asset again after a CDR package was put in place recently.
Sources said Tata Steel’s conditional offer to lenders sought a reduction of the debt burden by over 50 per cent through write-offs, conversion of debt into equity and preference shares. Tata Steel also wants banks to fund the cost of completion of the steel making project through additional lending.
Sources said that lenders, at a meeting on June 29, considered the possibility of converting the debt into equity and eventual takeover of control. However, ESL said the banks had not informed the borrower about such a development.
Though Umang Kejriwal-family controlled Electrosteel Casting Ltd owns 45.23 per cent in ESL, 79 per cent of the holdings is pledged with the lenders.
Sources told BusinessLine that the lenders have also received an offer from a Singapore-based fund.
ESL still requires around ₹1,600 crore more to complete its integrated steel making project at Bokaro in Jharkahand. In 2014-15, ESL incurred a net loss of ₹624 crore.
The Singapore-based fund offer included fresh investment of around ₹1,000 crore and a reduction of debt burden including write-offs and conversion to under 20 per cent.
The steel maker is learnt to have offered to buyout the promoter’s stake at ₹2 a share, much lower price than the current market price of ₹3.87 on the BSE.