Binani gets ‘comfort’ letter from UltraTech

UltraTech Cement on Monday said its board had approved a comfort letter for an amount of Rs 7,266 crore to be given to promoters of Binani Cement signifying its intent to buy a 98.47% stake in the company.

The purchase can go through either if insolvency proceedings, under the purview of the IBC (Insolvency and Bankruptcy Code), against Binani Cement are terminated or the National Company Law Tribunal (NCLT) permits Ultratech’s revised bid to be considered. The resolution professional has said the preferred bidder is Dalmia Bharat.

KK Maheshwari, managing director, Ultratech said the assurance for an amount of Rs 7,266 crore had been given in response to a request by Binani Industries, the parent of Binani Cement.

With this, the resolution process for Binani Cement has acquired an altogether new dimension. Binani Industries is expected to move the Kolkata bench of the NCLT seeking to bring the company out of the insolvency proceedings, now that it is in a position to pay off the lenders. The next hearing on the matter is scheduled for March 22.

Meanwhile, the NCLT is also hearing a petition of UtlraTech Cement which has sought that its revised bid be considered.

The RP, Maheshwari said, had not considered revised bid even though it was taking care of all the creditors. Maheshwari hoped that the bid would be considered Ultratech has agreed to pay 100% dues of all financial creditors — secured as well as unsecured.

The MD believes Ultratech’s acquisition of Binani Cement would not result in a a breach of competition laws in the Rajasthan-Haryana-Gujarat market and therefore would get the approval of the Competition Commission of India (CCI). “The cement market in Gujarat and Rajasthan is quite fragmented and there are a host of other players and each one of them is expanding. The CCI clearance was a bogey raised by the resolution professional which is not capable of examining such issues,” Maheshwari said.

In a related development, some small lenders who had opposed the resolution plan by the now preferred bidder, Dalmia Bharat, are also likely to come out in favour of UltraTech’s proposal.

State Bank of India(SBI), Hong Kong has already filed an application in NCLT Kolkata against the move to accept the proposal by Dalmia Bharat on the principle of “equity”. Sources told FE that while most other lenders had seen 100% of their loans being repaid in full under the resolution plan approved, those of some including that of SBI in Hong Kong (exposure of Rs 36.8 crore) and of Exim Bank (`619.9 crore) had been subjected to an unreasonably large haircut without any specified reason.

“The board of directors at its meeting held on Monday after considering the request made by BIL has agreed to issue the comfort letter confirming that the company will provide funds amounting Rs 7,266 crore being the amount it had offered to the committee of creditors in terms of the resolution plans submitted by it for acquiring BCL,” UltraTech Cement said. However, this would be “subject to termination of IBC proceedings, entering into definitive agreement and other customary and regulatory approvals”, it added.

In a meeting held on March 16, the Committee of Creditors had approved the plan presented by Dalmia Bharat. This was objected by UltraTech on the grounds that its revised bid of Rs 7,266 crore was not considered. Maheshwari told FE that the RP never shared the criteria of assessing the bids and the revival plan despite they asking that it be shared. “Had the criteria been shared with us, we would have been H1, still we upped our earlier offer by Rs 700 crore in which all creditors were taken care of. It was at this stage that Binani Industries, which was feeling uncomfortable about the entire process decided to approach us”.

In a related development, some small lenders who had opposed the resolution plan by Dalmia Bharat, are also likely to come out in favour of UltraTech’s proposal. State Bank of India, Hong Kong has already filed an application in NCLT, Kolkata against the move to accept the proposal by Dalmia Bharat on the principle of “equity”. Sources told FE that while most other lenders had seen 100% of their loans being repaid in full under the resolution plan approved, those of some including that of State Bank of India in Hong Kong (exposure of `36.8 crore) and of Exim Bank (`619.9 crore) had been subjected to an unreasonably large haircut without any specified reason.

As per details on Binani Cement’s website, financial creditors of the company had claimed Rs 6,470.26 crore, while the NCLT had admitted claims worth Rs 6,469.36 crore. The creditors to Binani Cement include State Bank of India, IDBI Bank, Canara Bank, Bank of Baroda, Bank of India, Edelweiss Asset Reconstruction Company and others.

In FY2017, Binani Cement had posted a net loss of Rs 348 crore on revenues of Rs 1,527 crore, according to data from Capitaline. Its parent, Binani Industries had a total debt of `6,595 crore at the end of FY17, and it too incurred a net loss of `461 crore on revenues of `3,666 crore for the fiscal.

The Kolkata Bench of the NCLT had admitted an insolvency petition against Binani Cement On July 25, 2017. Bank of Baroda had referred the company to the bankruptcy court. Vijaykumar Iyer of Deloitte India was appointed as the resolution professional.