Lenders want Tata Steel to take over Electrosteel Steels

Lenders to Electrosteel Steels Ltd (ESL) favour Tata Steel taking over the financially stressed company.

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.

Investment banking sources told BusinessLine that the 27-bank consortium of lenders, led by the State Bank of India, preferred the Tata Steel offer to that of a $2-billion proposal by a Singapore-based fund.

In a disclosure to the stock exchange, ESL said that the lenders and the company have received “indicative term sheets for investment in the company from Tata Group as well as from a financial investor based in Singapore”.

Under an approved debt restructure plan, ESL has total liabilities of around ₹6,000 crore and requires fresh fund infusion of around ₹1,600 crore to complete its integrated steel making project at Bokaro in Jharkahand.

In 2014-15, ESL incurred a net loss of ₹624 crore and is on shaky wicket to service its debt.

According tosources, 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 issue of preference shares.

Tata Steel also wants banks to fund the cost of completion of the steel-making project through additional lending. The Singapore-based fund’s offer included fresh investments of around ₹1,000 crore and sought reduction of debt burden including write-offs and conversion to under 20 per cent.

Bankers are understood to favour Tata Steel for its standing in the industry. ESL sources said the company was yet to receive the Tata Steel’s offer document from the lenders. The steel-maker is learnt to have offered to buy out promoter’s stake at a much lower price than the market price.

The ₹10 ESL stock closed 6.63 per cent higher at ₹4.02 on the BSE on Thursday.

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