Kirloskar Ferrous makes ISMT a Rs 670 crore non-binding offer

Kirloskar Ferrous makes ISMT a Rs 670 crore non-binding offer

Pune-based Atul and Rahul Kirloskar-led Industries Ltd has submitted a Rs 670-crore non-binding offer to the lenders of loss-making Ltd, a maker of seamless steel tubes, said three people with the knowledge of the matter.

Kirloskar Ferrous Industries is a wholly-owned subsidiary of BSE-listed Kirloskar Oil Engines Ltd.

The non-binding offer equates to 20 paise on a rupee on total loans, including the interest component. ISMT had a term loan of Rs 3,359 crore, including interest, as of June 30, 2020, according to a disclosure made by the company to the Bombay Stock Exchange.

Lenders have appointed Desai Saksena & Associates (DSA), a legal firm, for the sale process. DSA has set a reserve price of Rs 670 crore based on the non-binding offer received from Kirloskar Ferrous, according to a notice uploaded on its website.

The legal firm has invited expressions of interest by November 1 and firm bids by November 15 for assignment of debt from asset reconstruction companies and alternate investment firms, according to the same notice.

After receiving firm offers, lenders may hold a Swiss challenge auction, one of the persons quoted above said.

BR Taneja-promoted ISMT has been in default since 2013, which resulted in a debt recast by lenders, said a banker to the defaulting steel company.

In recent years, Avenue Capital-backed Asset Reconstruction Company of India (Arcil) acquired ISMT’s rupee loans from State Bank of India, Indian Overseas Bank, Bank of Maharashtra, Bank of India and IDBI Bank, while Edelweiss ARC acquire rupee loans from ICICI Bank.

After this, Arcil has a supermajority of over 67% of the total debt – which is adequate to block a resolution – if the company is admitted to corporate insolvency and resolution process (CIRP). As per the Insolvency and Bankruptcy Code, any major decision under the CIRP has to be approved by at least 66% of lenders by value.

The remaining lenders – Bank of Baroda, Union Bank of India, Central Bank of India and IKB Deutsche IndustrieBank AG – continue to have rupee exposure to the company. ISMT also has foreign currency exposure equivalent to Rs 271 crore, according to the its annual report, wherein some of the Indian banks have exposure.

Its steel plant is located in Jejuri in Pune, close to the headquarters of Kirloskar group, while Kirloskar Ferrous has two pig iron plants in Karnataka.

Kirloskar Ferrous Industries did not respond to requests for comment.

The Kirloskar family recently hit the headlines over family feud about a deed of family settlement relating to the assets of the more than 130-year old Kirloskar group. Sanjay Kirloskar, who controls Kirloskar Brothers Ltd, in a letter to Sebi has accused Atul and Rahul Kirloskar – who jointly control Kirloskar Oil Engines Ltd, Kirloskar Industries Ltd, Kirloskar Pneumatic Company Ltd and Kirloskar Ferrous Industries Ltd – of allegedly attempting to usurp the legacy of Kirloskar.

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