Aditya Birla, Piramal-Bain, Shree make aggressive bids for Binani Cement

Could be the first stressed firm to be sold at a price higher than its debt

India’s top cement majors, including UltraTech Cement of the Aditya Birla Group and Shree Cement, and the stressed asset investment fund of Piramal Enterprises and Bain Capital Credit have made aggressive bids for Binani Cement, a 98.4 per cent subsidiary of BSE-listed Binani Industries.

Lenders are expecting bids to come in higher than the cement company’s debt of Rs 3,682 crore, as against significant haircuts taken by banks in other Insolvency and Bankruptcy Code (IBC) cases.

Binani Cement was sent to the National Company Law Tribunal (NCLT) under the IBC in mid-2017 after the company failed to repay its debt due to a lower capacity utilisation and paucity of working capital support from bankers. The resolution plans from potential bidders closed on December 22. According to the schedule announced by the resolution professional, the estimated date for closing the process is January 22.

One of the bidders said it had asked for some clarifications on the applicability of Competition Commission of India (CCI) norms on the takeover and extension of the deadline till the next Budget. The clarification from the CCI will be important for cement makers like UltraTech and Ambuja Cement because of their large capacities. 

UltraTech is India’s largest cement company with more than a 93 million tonne per annum (mtpa) capacity. It had taken over Jaypee group’s stressed cement capacity of 21 mtpa with over Rs 16,200 crore investment in 2016.

JSW Cement, which had earlier announced that it would bid for the company, has decided not to make a bid as the group is busy making bids for Bhushan Steel and Monnet Ispat.

According to a bidder, Binani Cement has an operating capacity of 11.25 mtpa in India, China and Dubai, and has good limestone reserves in Rajasthan, making it an attractive bet for the companies like UltraTech and Shree Cement to expand their capacity. 

Bain-Piramal, on the other hand, is looking for opportunities for its $1 billion stressed asset fund.

The response to Binani Cement is expected to be far better than bids for the 3 mtpa cement unit of Murli Industries that was sold at a liquidation value of Rs 400 crore, with the banks taking a haircut of 80 per cent on its debt.

Binani Cement, which made a net loss of Rs 370 crore on sales of Rs 1,892 crore in the financial year 2016-17, had said its sales were impacted by demonetisation. 

The move caused liquidity constraints, affecting the economy in general and the construction sector in particular during the third and the fourth quarter of 2016-17, it said in its annual report of 2017. 

Besides, the consortium of banks had agreed to restructure the account under the Joint Lenders Forum (JLF) mechanism. A corrective action plan was finalised by the JLF and a master restructuring agreement was also signed.

However, Binani Cement said some of the consortium lenders had not sanctioned the facilities as per the plan, and some of the lenders that had sanctioned facilities earlier did not disburse or partially disbursed the facilities. Finally, the corrective action plan could not be implemented in full within the time prescribed by Reserve Bank of India. Due to the non-disbursement of facilities and partial implementation, the company could not honour its debt obligations on time. 

Thus, some of the lenders assigned the full value of loans and the interest due thereon to Edelweiss Asset Reconstruction Company (EARC).  As on March 31, 2017, the outstanding of loans assigned to Edelweiss is Rs 2,252 crores by 14 banks and financial Institutions, it said.