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UltraTech Cement, an Aditya Birla Group company, will have to be mindful of country specific regulations and seek consent of joint venture partners as it looks to sell the associated global assets it inherited with the recent acquisition of Binani Cement in an insolvency-driven process.
The global assets that UltraTech plans to sell include the Binani 3B - the Fibreglass Company, with plants in Europe and Goa; a three-million tonne per annum (mtpa) joint venture cement plant in China; and a 2.5 mtpa grinding unit in the UAE. Binani Cement owned a 90 per cent stake the China JV and 49 per cent in the UAE venture.
3B is wholly owned by the Braj Binani Group.
As the fibreglass company was not part of the insolvency process in India, UltraTech has to file a fresh insolvency case, under European laws.. For the other two assets it has to find a buyer approved by joint venture partners.
Difficult sales
Before filing for insolvency, the Binani Group had tried to sell its stake in the cement venture to its Chinese partner, who refused to acquire it, sources said.
Finding a buyer for the grinding unit in the UAE is also difficult, as the cement supply there greatly exceeds demand.
In 2012, Binani Cement had given a corporate guarantee to raise ₹1,600 crore from IDBI Bank for acquiring the fibre-glass company. As part of the insolvency process, UltraTech has cleared the loan in full, and taken over the loan portfolio.
The fibre-glass plant has now defaulted on the first quarter interest payment of ₹40 crore, prompting UltraTech to sell the asset.
UltraTech cannot sell the unit directly, and has to initiate a separate process under the European law, said a merchant banker tracking the development.
In response to a BusinessLine questionnaire, UltraTech said the company has stepped into the shoes of lenders in all respects, including securities against the loan amount.
The enforcement of securities is governed by loan covenants. It will be UltraTech’s endeavour to recover their outstanding loan by enforcing securities in accordance with the loan agreements, the company added.
Without getting into specifics of any deal, Uday Bhansali, President (Financial Advisory), Deloitte, said the resolution professional has details of the insolvent parent company’s shareholding in its foreign subsidiary. The bidders also assign a value to the foreign asset, regardless of whether they want to retain it..
In case of the joint venture, he added, the winning bidder has the right to the extent of his shareholding in the foreign asset.
Recovering the loan
As per market estimates, if UltraTech manages to sell all the three assets, it will recover close to half of the ₹7,900 crore paid for the acquisition of Binani Cement, said an analyst.
“At this point, it would be hazardous even to guess the market value of securities held by UltraTech against the loan. The securities held against the loan are only for securing outstanding loan amount.UltraTech is not entitled to retain any amount in excess of their outstanding loan amount,” said UltraTech.
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