Vedanta gets letter of intent for Electrosteel in insolvency auction

Vedanta Limited on Saturday informed stock exchanges that it had received a letter of intent (LoI) for Electrosteel Steels. 

Vedanta had accepted the terms of the LoI and closure of the transaction would be subject to compliance with applicable regulatory requirements and in accordance with the final terms approved by the National Company Law Tribunal (NCLT), the company said in a statement to the exchanges. 

Though Vedanta did not disclose the bid value, it is believed to have offered Rs 55 billion for Electrosteel Steels, which owes banks Rs 103 billion.

At the last meeting of the committee of creditors (CoC), Vedanta was by consensus  selected as the successful resolution applicant. 

The next step after accepting the LoI will be to file a resolution application with the NCLT. 

From the Reserve Bank of India’s first list of non-performing assets, Electrosteel will be the second case where the bidder has accepted the LoI, the first being Tata Steel for Bhushan Steel. Tata Steel’s resolution application for Bhushan Steel has been filed with the NCLT. 

However, Renaissance Steel India is likely to move a fresh plea before the Kolkata bench of the NCLT on Monday, challenging the resolution professional’s decision on Vedanta and Tata Steel as eligible bidders 

Renaissance had earlier challenged the eligibility of the two bidders under Section 29A of the Insolvency and Bankruptcy Code (IBC). According to it, Tata Steel UK was guilty of an industrial accident and Konkola Copper Mines, a subsidiary of Vedanta Resources, was guilty of pollution in Zambia. Thus, both were ineligible to bid for the stressed asset, it argued.

It had moved the NCLT challenging the eligibility and the Kolkata Bench had given specific directions. In the first step, the resolution professional was to give reasons for the decision of eligibility of Vedanta and Tata Steel to Renaissance in three days. Renaissance, also a bidder for Electrosteel, had challenged the eligibility of Tata Steel and Vedanta under Section 29A of the Insolvency and Bankruptcy Code.

Renaissance was allowed to submit its reply or objections in three days. 

And finally, the resolution professional was directed to place all the objections of the applicant with supporting documents before the CoC with a copy of the NCLT order for its consideration. The CoC hence met on Thursday, and after consideration decided to go ahead with the process.