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The SBI-led lenders’ forum for Electrosteel Steels Ltd (ESL) is likely to appoint a consultancy firm for “interim management” of the company. A decision in this regard is expected on April 11.
According to sources, the need for hiring a management services firm arose as the lenders could not complete the due diligence on the intending strategic investor in the company.
ESL has a debt burden is ₹10,500 crore and the monthly finance cost works out to ₹90 crore. The company failed to turnaround after debt restructuring.
The interim management would replace Umang Kejriwal’s Electrosteel Castings from ESL management until the forum takes the decision on allowing a London-based fund house, First International Group, to pick up 51 per cent stake in the listed entity through a structured offer at market prices.
Sources said a number of firms, including Ernst & Young (E&Y), Grant Thornton, Avenir Management Services and Alvarez & Marshal India, have offered their services with varying monthly hiring charges. Steel Authority of India Ltd has also evinced interest in running the interim management.
Sources mentioned that one of the interested firms quoted ₹95 lakh a month for the management services for the interim period. The others havequoted ₹20-30 lakh a month.
Asset valuationMeanwhile, the lenders’ forum has already got ESL’s asset valuation done by E&Y. The firm also ran the due diligence exercise on the intending strategic investor, First International. SBI also got the due diligence done by Kroll Associates (India). The forum has elicited a third due diligence report from Deloitte Touche Tohmatsu.
Of the three firms, two are understood to have given favourable diligence report on First International. However, even after months, SBI and the forum have not been able to take a call on the diligence issue.
ESL’s current nine-member board would meet on April 13 to decide on private placement of equity shares to Shandong Province Metalluring Engineering Co of China, its principal equipment supplier.
Sources said shares of around 5.5 per cent of the enhanced paid-up capital would be allotted to Shandong as a consideration for equipment supply (of around ₹150 crore) to ESL’s integrated steel and ductile iron pipe making project at Bokaro.
The 1.5 million tonne plant and its other units are said to be currently operating at 100 per cent capacity.
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