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JSW Steel, which is in the race to acquire strained assets, has come in support of stressed ‘legitimate promoters’ who have been barred from bidding for their own companies that have been put under the hammer by the National Company Law Tribunal (NCLT).
Sajjan Jindal, Chairman, JSW Steel, tweeted on Tuesday: “Existing promoters (of NPA companies) are allowed to control the management in non-NCLT cases with deep debt restructuring involving large haircuts if they are not wilful & non-cooperative borrowers. If so, why to differentiate in #NCLT cases to debar legitimate promoters in bidding process?”
There’s a differenceConcurring with Jindal’s view, Seshagiri Rao, Joint Managing Director, JSW Steel, told BusinessLine the law should distinguish between legitimate promoters and wilful defaulters as some of the steel companies to be auctioned have turned sick due to external factors such as ban on iron-ore mining, disruption in coal supply and cheap steel imports.
Referring to the RBI’s December 30 deadline for banks to resolve the next set of 28 NPA cases, Rao said banks are working with the promoters of these companies for a resolution, and willing to take huge haircuts.
Uniform normsThere cannot be two set of norms for stressed companies in NCLT cases, where promoters are banned, and another for companies outside its purview, where promoters are allowed to take over their company after banks take huge haircuts, he said.
With the NCLT banning promoters from bidding for their own companies, banks fear the value of assets will be beaten down and they have to take hefty haircuts.
Essar Steel, one of the companies referred to the NCLT, has been the worst affected. Production at Essar Steel, which was paying lenders an average of ₹250 crore every month, has fallen 15 per cent to 1.33 million tonnes since the company was referred to the NCLT in the September quarter. Last fiscal, the company repaid loans worth ₹3,500 crore.
With the new ordinance, the Ruias, the promoters of Essar Group, will not be able to bid for their own company.
While the ordinance banning promoters will definitely punish the promoters, it will not help banks recover the maximum money by selling the assets, said an analyst.
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