"Once the petition is admitted in the National Company Law Tribunal, the independent resolution professional will have to call a creditors' meeting in 30 days and then a resolution plan will have to be submitted to the tribunal in 180 days. We are hopeful that a resolution will now emerge. Monnet is a quality asset," Sandeep Jajodia, chairman and managing director, Monnet Ispat
& Energy, said.
Monnet ran into a huge debt, and in August 2015, lenders invoked strategic debt restructuring (SDR). SDR was introduced by the RBI
to tackle bad loans, by allowing banks to acquire control of a defaulting company by converting the loans into equity. That was to be followed up by bringing in new promoters after which sticky assets were to be upgraded to standard ones.
In February, JSW Steel had put in a bid for Monnet. But lenders had not taken a call either way because it entailed taking a haircut of 75-80 per cent. Monnet's current debt is close to Rs 10,000 crore. That bid has been in limbo since.
Monnet happens to be one of the few companies
in which lenders had converted their debt into equity. Lenders currently hold around 53 per cent in the company.
Sources explained that while the steel industry was better off compared to last December when Ebitda (earnings before interest, tax, depreciation and amortisation) was negative, it is at break-even level now. "It is just gradually improving but demand is still very low," they said.
Monnet Ispat's troubles started when the Supreme Court de-allocated 214 coal blocks in 2014. Monnet had five coal mines and was the second largest coal-based sponge iron producer. Its facilities are based in Raipur and Raigarh in Chhattisgarh.
From a sponge iron player, Monnet Ispat
had transformed to a steel maker by commissioning a plant at Raigarh in FY14. The operating mine close to Raigarh provided the plant coal. That seamless supply went haywire when the coal blocks were cancelled. By the time the plant was built, the coal block was cancelled and banks stopped the balance disbursement.
When China started dumping material in the market, it added to Monnet and the steel industry's woes.