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New Delhi, Nov 14 () In a case of non-disclosure of key information to investors in IPO papers, the Securities Appellate Tribunal on Thursday reduced the amount of penalty levied by markets regulator Sebi on Electrosteel Steel and its three merchant bankers - SBI Cap, Axis Capital and Edelweiss Financial.
The matter pertains to the IPO of Electrosteel Steels Ltd (ESL), promoted by Electrosteel Castings Ltd (ECL) in September 2010, for which Axis Capital, SBI Capital Markets and Edelweiss Financial Services were the Book Running Lead Managers.
The tribunal in a order said it has reduced the amount of penalty of Rs 1 crore imposed on ESL to Rs 50 lakh. Further, it lowered the Rs 1 crore fine slapped by the regulator on the three merchant bankers to Rs 50 lakh.
As far as the appeal of ECL is concerned, the Securities Appellate Tribunal (SAT) said the penalty of Rs 50 lakh imposed by Sebi on the company cannot be termed "as excessive or harsh". Therefore, no interference is needed.
While reducing the penalty on the merchant bankers, the tribunal noted that it tend to agree with their submissions that non-disclosure of the initial round rejection of the mining project proposal in the prospectus is not in the category where maximum penalty is imposable.
"We consider the continued efforts of these appellants (ESL and ECL) in pursuing the matter further for reconsideration etc as well as in detailing the risk factors with possibilities of not getting the final approval etc as disclosed in the prospectus as mitigating factors," it added.
The ruling comes following appeals filed by these entities challenging an order passed by Sebi in March 2016, wherein a fine of Rs 1 crore was imposed on the three bankers, a penalty of another Rs 1 crore on the issuer company ESL and Rs 50 lakh on ECL.
The Sebi order came following its probe into complaints that the company did not disclose in IPO documents that its proposal for an iron ore mine in Jharkhand was rejected by the Ministry of Environment and Forest.
After receiving complaints, Sebi had sought comments from ESL and the merchant bankers for failing to ensure disclosure in initial public offering (IPO) papers regarding rejection of the proposal for forest clearance of Kodolibad Iron ore mine.
From the replies, it was observed that the in-principle approval for ECL's proposal for diversion of forest land for Kodolibad Iron Ore Mine was rejected by the MoEF.
It was further observed that after the rejection, ECL had requested the state government to recommend its proposal to MoEF again, and subsequently, the MoEF had granted in-principle approval to ECL for diversion of forest land for the purpose of the iron ore mine, subject to fulfilment of 29 conditions.
In their submissions before Sebi, ECL and ESL had stated the merchant bankers advised and considered that "it was not required to disclose the said interim rejection, since the same was not a final decision and was only an interim step in the process involved". SP
BAL

SAT reduces fine on Electrosteel, merchant bankers in IPO non-disclosure case

(Image source- Reuters) <ul><li>Fresh off its acquisition of Electro<keyword id="34570" type="COMPANY" weightage="20" keywordseo="steel">steel</keyword> Steels, Vedanta, a metals and mining behemoth, is moving ahead with plans to set up a steel plant in the Indian state of <keyword id="6360371" type="LOCATION" weightage="20" keywordseo="jharkhand">Jharkhand</keyword>. </li><li>The company could spend as much as $4 billion on the facility, which is expected to have an annual production capacity of 4.5 million tonnes. </li><li><keyword id="445200" type="COMPANY" weightage="20" keywordseo="Electrosteel">Electrosteel</keyword> already has a steel facility in the Bokaro district of Jharkhand which boasts a production capacity of 1.5 million tonnes per annum. Vedanta plans to initially spend $300 million to boost this plant’s capacity to 2.5 million tonnes. </li><li>Vedanta’s new facility, which will be owned by its subsidiary Electrosteel, will also be based in Bokaro and will likely be adjacent to the existing facility. </li></ul>Fresh off its acquisition of Electrosteel Steels, Vedanta, a metals and mining behemoth, is moving ahead with plans to set up a steel plant in the Indian state of Jharkhand. The company could spend as much as $4 billion on the facility, which is expected to have an annual production capacity of 4.5 million tonnes, according to <a href="https://www.livemint.com/Companies/f6jny37UuKQ7GV68VIh99H/Vedanta-to-set-up-steel-plant-in-Jharkhand-for-4-billion.html">media reports</a>. The move is part of Vedanta’s integration of its newly-acquired steel company. Electrosteel already has a steel facility in the Bokaro district of Jharkhand that boasts a production capacity of 1.5 million tonnes per annum. Vedanta plans to initially spend $300 million to boost this plant’s capacity to 2.5 million tonnes. Vedanta’s new facility, which will be owned by its subsidiary Electrosteel, will also be based in Bokaro and will likely be adjacent to the existing facility. Hence, the combined annual capacity of both facilities will be seven million tonnes. The company will likely receive the support of the state and central governments with regards to land acquisitions and the fast-tracking of approvals. The Indian government plans to increase the country’s steel output to <a href="https://www.business-standard.com/article/markets/2018-a-year-of-raw-material-scarcity-insolvency-glut-for-steel-industry-118122100264_1.html">300 million</a> tonnes by 2030, more than double the total production in 2017-2018. Anil Agarwal, the founder and chairman of Vedanta, said that the Bokaro investment would result in the creation of around 120,000 jobs, half of which involve direct employment. The operation of the new plant is expected to commence in three to four years. Vedanta successfully bid for the bankrupt Electrosteel Steels Ltd <a href="https://economictimes.indiatimes.com/industry/indl-goods/svs/steel/nclt-approves-vedantas-bid-for-electrosteel/articleshow/63808596.cms">in April </a>this year, making it one of the first resolutions under India’s new Insolvency and <keyword id="43550" type="EVENT" weightage="20" keywordseo="Bankruptcy">Bankruptcy</keyword> Code. The ₹53.2 billion acquisition proposal dovetailed with the mining company’s plan to expand its manufacturing presence in the steel industry. Vedanta had also bid for the bankrupt Essar Steel, but was beaten by <keyword id="47654" type="COMPANY" weightage="20" keywordseo="ArcelorMittal">ArcelorMittal</keyword>, the world’s largest steelmaker, which submitted an offer of ₹420 billion. While the resolution seems to be mired in <a href="https://www.livemint.com/Companies/JMiXtnLXX1iuqjBTuKP0OK/Yet-another-spanner-in-ArcelorMittals-Essar-Steel-works.html">a number of legal proceedings</a>, ArcelorMittal is banking on the acquisition to help return it to a competitive position in the Indian steel industry. Essar Steel has a facility in Gujarat that is capable of manufacturing 10 million tonnes a year, making it the largest such plant in India. SEE ALSO: <a href="https://www.businessinsider.in/indias-steel-industry-is-set-for-a-shakeup-after-arcelormittal-finally-emerges-as-the-winning-bidder-for-essar-steel/articleshow/66316447.cms">India’s steel industry is set for a shakeup after ArcelorMittal finally emerges as the winning bidder for Essar Steel</a> <a href="https://www.businessinsider.in/arcelormittal-submits-a-higher-bid-for-bankrupt-essar-steel-but-on-one-condition/articleshow/65769020.cms">ArcelorMittal submits a higher bid for bankrupt Essar Steel but on one condition</a>

After buying out the bankrupt Electrosteel, Vedanta is spending billions on a new steel plant in the Indian state of Jharkhand

New Delhi, Mar 12 () Vedanta Ltd on Thursday said total production at its Lanjigarh alumina refinery is expected to increase to 1.8 million tonne (MT) in 2019-20, on the back of a significant improvement in operating efficiencies. The production at the Odisha-based refinery had stood at 1.5 MT in the previous financial year. "The Lanjigarh alumina refinery is set for a record performance in 2019-20 with total production expected to increase to 1.8 million tonne from 1.5 million tonne in the previous fiscal," the company said in the statement. The improvement in operational parameters has been driven by a 26 per cent reduction in caustic soda consumption and a 19 per cent decline in conversion cost. The unit has achieved a 9 per cent reduction in bauxite cost per tonne through strategic bauxite sourcing. Lanjigarh now ranks among the top 5 alumina refineries globally in terms of total energy consumption. "There has been a reduced carbon intensity to 30 per cent below global average of 1,500 dollar per tonne. Lanjigarh is on track to deliver aluminium cost of production exit rate in Q4 2020," it said. Further, Hindustan Zinc Ltd has recorded metal-in-concentrate production of 90,000 tonne in February, while metal output jumped to 80,000 tonne for the month. The production cost, excluding royalty, fell below USD 1,000 per tonne levels in the fourth quarter of 2019-20. The steel business of Electrosteel Steels Ltd has recorded an improvement in operational performance with Ebitda margins of over USD 100 per tonne in the fourth quarter of 2019-20. Electrosteel is set to achieve the best-ever production of 1.4 million tonnes in 2019-20. Meanwhile, Cairn Oil &amp; Gas has successfully ramped up its facilities to full production ahead of time. Vedanta Ltd, a subsidiary of Vedanta Resources Ltd, is one of the world's leading diversified natural resource companies with business operations in India, South Africa, Namibia, and Australia. SID HRS

Vedanta expects output at Lanjigarh alumina refinery to increase to 1.8 MT in 2019-20

New Delhi, Feb 4 () Vedanta Ltd on Tuesday said the National Company Law Tribunal, Kolkata Bench, has approved the scheme of amalgamation of its arm Vedanta Star Ltd with Electrosteel Steels Limited (ESL). 
Post the amalgamation becoming effective, Vedanta will directly hold 95.48 per cent in ESL.
Vedanta Ltd had pursuant to the resolution plan approved by National Company Law Tribunal, Kolkata bench had acquired ESL, through its wholly-owned subsidiary VSL, the company said in a regulatory filing to the BSE.
The acquisition of ESL fits into Vedanta's strategy of forward integration; complementing the existing iron ore set-up as well as mines in Jharkhand, it said.
The business has seen a complete turnaround since its takeover with the combination of right people, higher volumes and better cost control leading to a visible positive change.
"This positions ESL to become a significant player in the Indian steel sector," it added. SID NAM
MKJ

NCLT nod to amalgamation scheme of Vedanta arm VSL with Electorsteel Steels

New Delhi, Mar 29 () Metals and mining magnate Anil Agarwal has for the first time taken a board position on his flagship Indian firm, Vedanta Ltd, replacing his brother Navin.Agarwal, 66, who turned a tiny scrap metal business into a mining conglomerate, had so far headed the board of London-headquartered Vedanta Resources.The Indian flagship Vedanta Ltd houses its oil and gas, aluminium, power, iron ore, steel and copper business.In a statement, the company said Agarwal has been appointed "as the non-executive chairman of Vedanta Ltd".He replaces his brother Navin, who will now be the Executive Vice Chairman of the Board.The changes followed chief executive officer S Venkatakrishnan resignation. He was replaced by Sunil Duggal, current head of Vedanta unit Hindustan Zinc Ltd."The company will be run by a management committee comprising of CEO, CFO, CHRO and CCO who will take all key decisions collectively under the guidance of Chairman," the statement said.Besides the Agarwal brothers, Vedanta Ltd also has Anil's daughter Priya as a board director. His trusted lieutenant Tarun Jain is also on the board.Former Hindustan Unilever executive Arun Kumar GR is Chief Financial Officer.Anil Agarwal's other listed firm Hindustan Zinc Ltd is headed by his wife Kiran. He is the non-executive chairman of Sterlite Technologies Ltd, the only other Indian listed company in the group.All other group firms, Cairn Oil and Gas, Sterlite Cooper, Balco, Sesa Goa Iron Ore, Vedanta Aluminium and Electrosteel Steels Ltd are headed by chief executive officers.Ethnically a marwari from Patna, Agarwal came down to Mumbai as a scrap dealer in 1976 and went on to build an empire in copper, zinc, aluminum and iron ore. A school dropout, he founded Vedanta Resources and has been its Executive Chairman since March, 2005.In October 2018, Agarwal took Vedanta Resources private after paying more than USD 1 billion for the one third of the metals firm that he didn't already own.In 2017, he bought a 19 per cent stake in London-listed miner Anglo American through his family trust and sold it in 2019.Vedanta has previously stated that it would invest Rs 60,000 crore expansion of its zinc, silver and oil and gas business. ANZ BALBAL

Anil Agarwal for the 1st time takes board position on Vedanta Ltd

major cos: RameshNew Delhi, Mar 12 () The insolvency and bankruptcy lawhas resulted in recovery of just 10 per cent of defaultedloans in case of companies other than the seven big onesreferred for resolution, senior Congress leader Jairam Rameshsaid in Rajya Sabha on Thursday.Speaking on a bill to further amend the Insolvency andBankruptcy Code to give protection to new owners of a loandefaulter company against prosecution for misdeeds ofprevious owners, Ramesh said of the 970 cases referred to IBC,780 have been liquidated, indicating a mortality rate of 80per cent.The first objective of the IBC was to save companies butwith a mortality rate of 80 per cent it is not life saving, hesaid.Ramesh said against admitted claims of Rs 3.51 lakhcrore, Rs 1.50 lakh crore has been recovered by way ofauctioning defaulting firms to new buyers.The recovery was 43 per cent, implying that banks took ahair cut of 57 per cent on their loans, he said.If the big seven firms -- Electrosteel, Bhushan Steel,Monnet Ispat, Essar Steel, Alok Industries, Bhushan Power &amp;Steel and Jyoti Structures are excluded then the totalrecovery is 10 per cent, he said, "This means banks took haircut of 90 per cent.""That is matter of great concern," he said.Ramesh also sought revisiting provision in the amendedIBC that gives power to resolution professional to order otherfirms such as small and micro enterprises to continuesupplying goods and services to the defaulter firm.Under the law, a resolution professional oversees theinsolvency process.This raises the risk of default for MSME firms, he saidseeking revisiting of the provision in the bill on supplyingto defaulter firm."You should not sacrifice interest of MSME sector," hesaid.He went on to advocate a special regime for MSMEs byamending the 2006 MSME Act by allowing them to list accountsreceivable above Rs 1 crore so they can invoke IBC to recoverdue amounts.MSMEs face cash flow issues mostly due to delayedpayments, he said.Earlier, introducing the Insolvency and Bankruptcy Code(Amendment) Bill 2020, Finance Minister Nirmala Sitharamansaid insolvency and bankruptcy code (IBC) was brought in 2016as desired results were not coming from prevalent laws toresolve defaults.Since 2016, several amendments to IBC have been broughtto keep pace with developments in the outside world and orderspassed by courts and tribunals on their interpretation of thelaw, she said.She said the bill was brought in the previous Wintersession of Parliament but couldn't be passed and so anordinance was promulgated. The present bill is to convert theordinance into a law.Mahesh Poddar (BJP) said the amendment to the IBC willprotect current management from past mistakes of previousowners. ANZDV DV

IBC led to recovery of just 10% of defaulted loans in non-

Banks are now gearing up to go after three defaulters-Essar Steel, <keyword id="47912" type="CITY" weightage="20" keywordseo="Bhushan-Steel">Bhushan Steel</keyword> and Electrosteel Steels-who have to repay loans amounting more than Rs 1 lakh crore. Lenders led by the <keyword id="6354731" type="CITY" weightage="20" keywordseo="State-Bank-Of-India">State Bank of India</keyword> (SBI) will decide their fate as these three make up around half the loans of the top 12 defaulters identified by the Reserve Bank of India. SBI, which is the lead bank for all the three steel companies, has called a meeting of the joint lenders forum (JLF). "The fate of the three large steel companies will be sealed soon. Lenders will seek mandate from the consortium to file for corporate insolvency,” a senior SBI official told ET. ET reported banks have outstanding loans worth Rs 45,000 crore to Essar Steel, Rs 47,000 crore to Bhushan Steel, and Rs 11,000 crore to Electrosteel Steels. Banks are meeting to come up with a solution to take stringent action against these defaulters.

Next are these 3 large defaulters who are on banks’ list. They make up nearly half the loans of 12 defaulters identified by RBI

New Delhi, Mar 13 () NCLAT Chairperson Justice Sudhansu Jyoti Mukhopadhaya, who handled several big-ticket insolvency cases like Essar Steel during his tenure at the appellate quasi-judicial body, retired on Friday. Justice Mukhopadhaya, who turns 70 on March 15, was the first chairperson of the National Company Law Appellate Tribunal (NCLAT) which was established on June 1, 2016. An NCLAT chairperson is appointed for five years and can hold office till the age of 70 years. He delivered several landmark judgements during his tenure of nearly four years. He supervised and handled several major big ticket insolvency cases that includes Essar Steel, Bhushan Power &amp; Steel, Bhushan Steel, Jaypee Infratech, ElectroSteel Steel, Binani Cement, Reliance Communications.Besides, Justice Mukhopadhaya also delivered several judgements and laid precedents for several NCLT orders and the newly-enacted Insolvency &amp; Bankruptcy Code, 2016.He would also be known for his order reinstating the ousted Tata Sons head Cyrus Mistry as it shocked the entire business world.Besides, he also proposed resolution of the IL&amp;FS group which has an outstanding debt of over Rs 94,000 crore, on the pattern of IBC."I have enjoyed every moment here from the day one," he said while addressing a function organised by the NCLAT bar here on Friday.He also said that the Chennai bench of the NCLAT would be functional from Friday."I am happy that all courts are functioning with speed. For me, speed was essence for any resolution process," he said. Prior to this, Justice Mukhopadhaya was a judge of the Supreme Court of India from September 13, 2011, to March 14, 2015.Justice Mukhopadhaya had started practice at Patna and Ranchi benches of the High Court in 1979 and was designated as senior advocate in February 1993.He was appointed as a permanent Judge of the High Court of Patna in November 1994 and after that served as judge of Jharkhand High Court after its creation. He also served as Judge of the Madras High Court, where he also functioned as the Acting Chief Justice for about five months.Thereafter from December 2009 to September 2011 he was the Chief Justice of the High Court of Gujarat and then was elevated to the apex court from where he retired on March 14, 2015.NCLAT constituted under Section 410 of the Companies Act, 2013 for hearing appeals against the orders of National Company Law Tribunal (NCLT). It is also appellate tribunal for hearing appeals against the orders passed by NCLT under the IBC and Insolvency and Bankruptcy Board of India.It is also the Appellate Tribunal to hear and dispose of appeals against any direction issued or decision made or order passed by the Competition Commission of India (CCI).The NCLAT Chairperson is appointed for a term of five years and can hold office till the age of 70 years. KRH MRMR

NCLAT Chairman Justice S J Mukhopadhaya retires

<ul><li>The SC has ordered that the plant owned by Vedanta Private Limited will remain shut. </li><li>In December 2018, National Green Tribunal had said it could be reopened. </li><li>The court has also directed the CBI to conduct an investigation regarding the police firing which killed 13 protestors.</li></ul>The Supreme Court has ordered that the controversial <keyword id="6362295" type="UNKNOWN" weightage="20" keywordseo="sterlite-copper-plant">Sterlite Copper plant</keyword> owned by Vedanta Private Limited in Tamil Nadu will remain <a href="https://timesofindia.indiatimes.com/business/india-business/supreme-court-refuses-to-allow-reopening-of-sterlite-plant/articleshow/68043399.cms">shut</a>, overturning an earlier order with the country’s main environmental court. In December, India’s National Green Tribunal had allowed the reopening the plant, directing the Tamil Nadu Pollution Control Board to make it operational within <a href="https://scroll.in/latest/913653/top-news-icj-set-to-begin-hearings-in-kulbhushan-jadhav-case">three weeks</a>. In its judgment, Supreme Court said it Vedanta can now appeal the decision in the Madras High Court, saying that NGT does not have the jurisdiction to pass the order for its reopening. The Sterlite Copper plant came under the scanner last year, after violent protests broke out in Tamil Nadu’s Tuticorin against the plant’s reported adverse impact on pollution. The TNPCB had then ordered for the plant to be shut permanently, citing a provision of the <a href="https://indianexpress.com/article/india/sterlite-plant-tuticorin-vedanta-supreme-court-tamil-nadu-5588840/">Water Act, 1974</a>. In May 2018, in a police firing, 13 people were killed and now, the Supreme Court has ordered the CBI to conduct a fair and impartial investigation regarding the firing, according to ANI. In December last year, the parent group Vedanta had appealed to the Supreme Court that the Tamil Nadu government was giving a <a href="https://www.thenewsminute.com/article/tamil-nadu-has-given-us-bad-name-over-sterlite-vedanta-tells-supreme-court-96027">bad name</a> to the company over the <keyword id="7127357" type="UNKNOWN" weightage="20" keywordseo="sterlite-controversy">Sterlite controversy</keyword>, asking for electricity to the plant to be restored. See Also: <a href="https://www.businessinsider.in/india-deports-american-journalist-who-was-making-an-environmental-documentary-on-a-controversial-copper-smelter-plant/articleshow/67362130.cms">India deports American journalist who was making an environmental documentary on a controversial copper smelter plant</a> <a href="https://www.businessinsider.in/after-buying-out-the-bankrupt-electrosteel-vedanta-is-spending-billions-on-a-new-steel-plant-in-the-indian-state-of-jharkhand/articleshow/67255994.cms">After buying out the bankrupt Electrosteel, Vedanta is spending billions on a new steel plant in the Indian state of Jharkhand</a>

India’s Supreme Court orders controversial copper smelter plant Sterlite to remain shut

Both the <a href="http://www.businessinsider.in/searchresult.cms?query=Nifty">Nifty</a> and the <a href="http://www.businessinsider.in/searchresult.cms?query=Sensex">Sensex</a> are down for the third day in a row on Tuesday as sustained selling across the board hit stocks. Here is a snapshot of the trend in the cash market in mid-afternoon trade.
 BROADER INDICES: <keyword id="6354813" type="COMPANY" weightage="60" keywordseo="nifty">Nifty</keyword> lost 1.7% to 7,833 points <keyword id="6484188" type="CITY" weightage="60" keywordseo="Sensex">Sensex</keyword> down 1.6% to 25,853 points CNX 100 dropped 1.7% to 7,980 points CNX 200 fell 1.7% to 4,120 points CNX 500 fell 1.6% to 6,561 points CNX Small Cap dropped 2% to 5,062 points CNX Mid Cap slipped 1.5% to 12,864 points 

	SECTORIAL INDICES

	Bank Nifty plunged 3.2% to 16,601 points

	CNX PSU Bank lost 3.8% to 3,078 points

	CNX Metal dropped 2.9% to 1,779 points

	CNX Finance lost 2.7% to 6,807 points.
 

	TOP LOSERS ON NIFTY

	Punjab National Bank

	Bank of Baroda

	Idea

	Kotak Bank
 

	TOP GAINERS ON NIFTY

	<a href="http://www.businessinsider.in/searchresult.cms?query=TCS">TCS</a>

	<a href="http://www.businessinsider.in/searchresult.cms?query=Infosys">Infosys</a>

	<a href="http://www.businessinsider.in/searchresult.cms?query=Tech+Mahindra">Tech Mahindra</a>

	<a href="http://www.businessinsider.in/searchresult.cms?query=Sun+Pharma">Sun Pharma</a>
 

	VOLUME BUZZERS

	Trent

	Grindwell Norton

	TTK Prestige

	Rolta India
 

	NEW HIGHS

	Dishman Pharma

	Torrent Pharma

	D S Kulkarni

	Themis Medicare
 

	NEW LOWS

	ACC

	Federal Bank

	IDFC

	Electrosteel Steels
 

	ADVANCE-DECLINE RATIO

	NIFTY: 7/42

	SENSEX: 5/25

	FUTURES: 11/150

	BROADER MARKET: 542/1955 
	 
	Image credit: Indiatimes

Here's how the Cash Market is trading today

Lenders to Lanco <keyword id="2993348" type="UNKNOWN" weightage="80" keywordseo="Teesta-Hydro-Power">Teesta Hydro Power</keyword> would convert part of their Rs 2,400-crore loans to the company into 51% <a href="http://www.businessinsider.in/searchresult.cms?query=equity+">equity</a> after the <a href="http://www.businessinsider.in/searchresult.cms?query=Reserve+Bank+of+India+">Reserve Bank of India</a> (RBI) allowed such conversions. 
 
The measure allows bankers to take steps against truant <a href="http://www.businessinsider.in/searchresult.cms?query=borrowers">borrowers</a>. The new rule would help them find buyers for stressed assets, reported the Economic Times. 
 
Lanco Teesta <a href="http://www.businessinsider.in/searchresult.cms?query=Hydro+Power+">Hydro Power</a> is fully held by Lanco InfraTech. Lanco Teesta's project, cost for the 500-MW hydro power project located in <keyword id="48118" type="CITY" weightage="60" keywordseo="Sikkim">Sikkim</keyword>, is about Rs 3,283 crore. 
 
India's banks face a burgeoning debt burden that's often cited as a key risk to the country's financial health. 
 
A senior bank official said on the condition of anonymity: "Lenders have authorised the lead bank to start the process of acquiring a majority stake in the company and looking for a buyer." 
 
The official said: "Debt would be converted only to the extent of banks acquiring 51% shareholding," he said. 
 
<a href="http://www.businessinsider.in/searchresult.cms?query=Strategic+Debt+Restructuring+">Strategic Debt Restructuring (SDR)</a> gives banks controlling power 
This will be the second such instance of a bank exercising its right to acquire a majority stake in an ailing company. A fortnight ago, banks had planned to take control of Electrosteel Steels, which could not repay its dues. 
 
Banks have lent the company about Rs 9,500 crore. The SDR programme by RBI allows banks to acquire a controlling 51% in a financially troubled company by converting part of its debt into equity. 
 A consortium of lenders, including some large private and public sector banks, agreed to convert part of their loans to Lanco Teesta into equity at a recent meeting. Senior executives at a large <keyword id="174493" type="COMPANY" weightage="60" keywordseo="Commercial-Bank">commercial bank</keyword> said that close to Rs 780 crore will be converted into equity under the <keyword id="6357264" type="ORGANIZATION" weightage="60" keywordseo="capital-market">capital market</keyword> regulator's formula for this. 
 
It is important to know that as per the SDR scheme, a bank can convert its debt into equity only after the project has failed to meet some critical milestones. 
 
Experts are of the opinion that stake conversion could saddle banks with assets they have no ability to manage unless these are disposed of quickly. Others say drastic measures are needed to resolve a situation that's worsening. 
 
"There has been a delay in completing project and lenders are fearing there could be a cost overrun. This has prompted lenders to act," said a senior bank executive. 
 
Banks are taking such measures to curb the sharp spike in dodgy loans. ETIG data shows that in the past two years, there has been a 158% jump in loans where borrowers have not paid dues. Gross non-performing assets stood at Rs 3.1 lakh crore in FY15 against Rs 1.85 lakh crore in FY13 for all listed banks. 
 
(Image: Indiatimes)

Lanco lenders to acquire Teesta Hydro Power

A tool provided by the Reserve Bank of India (RBI) to help lenders tackle bad debts is instead helping to camouflage the scale of the problem, evidence of how the country's banks will struggle to meet an ambitious clean-up target in 16 months' time. 
 
India's banks are grappling with more than $110 billion of corporate stressed debt, a burden that is holding back fresh loans and hampering a speedier economic recovery. 
 
Hoping to press banks to acknowledge the size of bad debts and tackle them, the RBI last week set a March 2017 goal, although it did not specify exactly what would have to be achieved by that date. 
 
Emphasising the challenge ahead for governor Raghuram Rajan is the growing debate around the most high profile tool the RBI has offered lenders to date - strategic debt restructuring (SDR), a provision aimed at helping banks swap unpaid debt for majority control. 
 
Rajan has campaigned to get banks to classify debt correctly, and to oust errant company owners. Commercial banks say his team has been active, checking provisions and exactly how loans are recorded and reported. 
 
Yet while banks, including India's largest, have taken advantage of the benefits of SDR, none have yet used it to effectively tackle the underlying problems. 
 
Crucially, SDR allows debt in the process to be classed as "standard", without extra provisions or writedowns, for 18 months. But without other changes, that may create trouble down the line, analysts warn. 
 
"As banks through SDR are able to delay provisions on the stressed SDR accounts by 18 months, it would result in bunched up provisioning," Credit Suisse analysts said in a note, adding this could add to banks' already elevated credit costs. 
 
So far, since SDR was introduced in June, it has been invoked by banks in nine cases, with at least one other due. Most are steel, resources and infrastructure firms. 
 
In total, according to brokerage Religare, known SDR debts amount to some 641 billion rupees ($9.6 billion), or about 1 percent of all loans. 
 
But none of these cases have seen banks swap debt for equity, take control or significantly cut debt. 
 
TAKING A HAIRCUT 
 
The first SDR was invoked in July for Electrosteel Steels, to tackle 106 billion rupees ($1.6 billion) of debt, more than 11 times its market capitalisation. 
 
But its lenders, including State Bank of India and ICICI Bank, have yet to complete the swap or decide on a new investors, although bankers say there are suitors. 
 
According to Credit Suisse, private sector bank ICICI has the largest proportion of SDR loans as a percentage of its total, followed by state-run United Bank of India and Canara Bank. 
 
"We are unsure whether banks will benefit. This is just to delay the recording in the NPAs (non-performing assets) at present," said Priyanka Poddar, an analyst at Fitch Ratings' Indian affiliate, India Ratings and Research. 
 
A sharp drop in the share prices of the troubled firms at the heart of the SDR provision also spells trouble for the plan to use a swap to turn all debt into equity in one fell swoop. 
 
For these firms, even swapping debt for a majority stake will barely dent the arrears, as most have debts between 15 and 20 times the size of their market capitalisation. 
 
For example, Monnet Ispat, a manufacturer of sponge iron, steel and ferroalloys, should see banks take control by swapping just 3 percent of its more than 118 billion rupees of debt for equity. 
 
But bankers say the efforts may not be in vain and the process has a timeframe, making any bid to hide bad debts with SDR a short-lived one. 
 
"We may fail, though I'm not saying that we will. But it is not that we are trying to avoid NPA," said one senior banker at a state-run bank involved in SDR. 
 
He said banks were facing hitches including resistance from shareholders and difficulty agreeing on a debt haircut. 
 
RBI Deputy Governor S.S. Mundra said on Tuesday the central bank would look into the use of the tool, but cautioned the market against writing it off too soon. 
 
"It is work in progress," he told reporters. 
 
(Image: Indiatimes)

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