While deciding to conduct a forensic audit of Bhushan Steel’s operations, the consortium of lenders to the company on Monday decided to go ahead and disburse an additional R6,900 crore that had been sanctioned in March this year.
“We will not hold back the funds,” a senior bank told FE, which had first reported the news on the additional exposure. Bhushan Steel, which owes banks approximately R40,000 crore, reported a loss of R141.63 crore in the three months to June. The additional loans could further push up the firm’s interest costs, which came in at R552 crore; its operating profit was Rs 715 crore.
Bloomberg data show the firm had R31,754 crore of net debt in FY14 while company data say the debt was R35,142 crore. Around 11,034 crore of debt matures in the next four financial years. Bankers had sanctioned an additional
R6,900 crore in April and the account is classified in the Special Mention Account or SMA category where the interest is overdue by 0-30 days. The loan sanctioned in April was approved at a joint lenders’ forum (JLF) where lead banks State Bank of India (SBI) and Punjab National Bank (PNB) were present.
Bankers, who met in New Delhi to deliberate the course of action, decided to appoint a concurrent auditor to monitor cash flows on daily basis, PNB said in a statement. PNB, the leader of the term-loan consortium, said banks had agreed and approved a lenders’ independent engineer to monitor operations and ongoing expansion. Lenders will also appoint three nominee directors on the board of Bhushan Steel.
While noting that the asset was of good quality, SBI chairman Arundhati Bhattacharya had said recently the consortium was hoping to rope in a management agency to oversee the day-to-day running of the unit. On Monday, lenders advised the company to bring in more equity and also to sell non-core assets. Last week the company had announced it would seek shareholder approval to raise $1 billion through securities. The Bhushan Steel stock closed at R155.5, down nearly 5% on the BSE on Monday; its market capitalisation has fallen to R3,454 crore from R10,265 crore in February.
According to a corporate presentation, the Bhushan Group has strategic investments through its subsidiary Bhushan Steel (Australia) in Bowen Energy, in which it has a 100% stake. The presentation says Bhushan Group has a strategic investment in Orissa Sponge Iron and