"As per the terms of approved Resolution Plan, Bamnipal Steel (BNPL), a wholly-owned subsidiary of Tata Steel, will initially subscribe to 72.65 per cent equity share capital of BSL at face value i.e.at Rs 2 per share, for an aggregate amount of Rs 158.89 crore", Tata Steel said. NCLT has dismissed Bhushan Steel employees' plea opposing Tata Steel's bid.
"The financial creditors shall receive a total consideration of Rs 35,200 crores for the settlement of the existing financial debt of BSL", Tata Steel said.
The transaction will be funded through a combination of equity subscription and inter-corporate loans, of which up to Rs 9,000 crore loans has an option of conversion into equity shares of BSL. The NCLT nod will be a shot in the arm for Tata Steel which has been allegedly facing challenges on the ground in its efforts to assert control over BSL's main plant at Dhenkanal in Odisha.
NCLT also dismissed the plea of engineering major L&T, an operational creditor of BSL, which had requested for a higher preference in recovery of debt on par with the financial creditors of the corporate debtor.
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Bhushan Steel was on the RBI's first list of 12 companies referred to the National Company Law Tribunal previous year. This values the equity value of Bhushan Steel at 59.7% discount to the current market capitalization.
Tata Steel's subsidiary Bamnipal Steel Limited will acquire the majority equity of Bhushan Steel Limited.
Bhushan Steel is one of 12 companies transferred to the bankruptcy court in 2017, over a government move to clear bad loans choking credit at Indian banks.
With the deal now approved by NCLT, Tata Steel will add 5.6 million tonnes per annum to its existing capacity of 13 mtpa and emerge as the largest steel producer in the country, ahead of JSW Steel. Bhushan Steel owes almost Rs 56,000 crore to its lenders. A combination will transform the former into a leading producer of flat steel in India, as the leader is now JSW Steel with about 13 million mt/year of capacity. The company, which was admitted for insolvency proceedings last February, had defaulted on its ₹56,000-crore loan.