Mapping insolvency: UltraTech may shell out over Rs 79 bn for Binani Cement

With Binani Cement’s insolvency resolution process overshooting the 270-day time frame by nearly two months, UltraTech Cement’s final acquisition cost may surpass its offer of Rs 79.60 billion for the cement firm, mainly due to the increasing number of cases and mounting interest costs.

UltraTech is the highest bidder for Binani Cement.

According to a legal counsel in the National Company Law Tribunal (NCLT), the Aditya Birla Group firm is liable to pay lenders Rs 15 million per day as additional interest till the final takeover of the company. In addition, under UltraTech’s offer, none of the creditors is taking a haircut.

If the litigation process drags on, UltraTech’s finances will get stressed. The company’s has already offered nearly Rs 13 billion more than the Dalmia Bharat-led consortium. Dalmia Bharat’s plan does not include paying interest to lenders as on date, and so the company will not have to bear any additional cost.

Jinan KR, member, judicial, at the Kolkata Bench of the NCLT, said even if the tribunal passed an order, it would still go to the Supreme Court. 

Both UltraTech and Dalmia Bharat, as well as Binani Cement’s promoters, were likely to drag the case to the Supreme Court for a final verdict in the event of an unfavourable order from the NCLT or the National Company Law Appellate Tribunal (NCLAT), sources said.

UltraTech, however, will have to pay the additional interest to lenders only after the case finally concludes in its favour.

The 270-day moratorium period for Binani Cement ended on April 21. The NCLT has ordered the resolution professional of Binani Cement to take charge of the company’s management till further orders. 

While Binani Cement’s resolution professional estimated the company’s liquidation value at Rs 23 billion, Rajputana Properties, the Dalmia Bharat led consortium that was declared the highest bidder initially, had agreed on a Rs 67 billion proposal. According to executives at Rajputana Properties, any amount higher than Rs 67 billion was not financially viable. 

Sources opposing the takeover of Binani Cement by Dalmia Bharat alleged that fresh cases filed by Dalmia Bharat in the NCLT, the NCLAT and the Supreme Court were an attempt to “bleed UltraTech’s financial position”. UltraTech opposed the resolution process for Binani Cement after the resolution professional placed the Dalmia Bharat-led consortium’s plan for approval before the NCLT. 

UltraTech did not anticipate such a prolonged litigation period, and hence had agreed to pay lenders the total outstanding as on date, company sources said.

One of the reasons why UltraTech’s plan received the approval of lenders was the interest component. Even if the company paid the lenders a higher amount than it had initially anticipated, it would still help UltraTech attain a 14 million tonne (mt) capacity in Rajasthan. This will help it challenge Shree Cement’s 19 mt capacity in that state.