The Supreme Court (SC) verdict allowing UltraTech Cement to take possession of the stressed Binani Cement has been a boon not only for UltraTech, but also for Braj Binani, the promoter of Binani Cement. He was a guarantor to EXIM Bank and SBI Hong Kong.
Under the proposal from rival bidder, the Dalmia Bharat-led consortium, EXIM Bank would have recovered 72.59 per cent of its Rs 6.2-billion claim and SBI Hong Kong would have got 10 per cent of its Rs 370-million claim.
Sources aware of the developments in the case said if Dalmia Bharat’s plan was approved, both banks could have tried to recover dues from Binani by invoking the guarantee. “He might have been forced to pay the residual amount,” said a source.
The SC on November 19 had upheld the National Company Law Appellate Tribunal (NCLAT) approval of UltaTech’s Rs 79-billion bid to buy Binani Cement.
Lenders said after the completion of payments through the insolvency process, creditors can still sue a guarantor. One lender said although after a takeover the promoter changes, the guarantee can still be invoked as “the guarantor is a person and not a designation”.
“Under UltraTech’s plan, however, both banks are being paid in full, so they won’t sue Binani,” a source said.
Other creditors, the Dubai branch of IDBI Bank, the London branch of Bank of Baroda, the Bahrain unit of State Bank of India and Syndicate Bank, were promised full payment by both Dalmia Bharat and UltraTech.
UltraTech is also paying operational creditors in full and thus these creditors is also expected not to pursue Binani for repayment. They have claims to the tune of Rs 4.43 billion. Dalmia Bharat had planned to pay them only Rs 1.5 billion or 35 per cent of their claims.
The committee of creditors had approved the plan of Rajputana Properties, the consortium led by Dalmia Bharat. Binani Cement had, however, opposed it, and had also claimed its assets were undervalued. It had also worked out an out-of-court settlement with the lenders. This was financially backed by UltraTech.
The Kolkata Bench of the National Company Law Tribunal (NCLT) had consented to this plan, but the NCLAT struck down the settlement. The NCLT order also displaced Dalmia Bharat as the H1 bidder.
This acquisition is a major boost for UltraTech as well. Now, its capacity in north India is 24 million tonnes, same as Shree Cement.
According to a Centrum Broking report, the Aditya Birla Group firm’s capacity share will increase from the current 17 per cent to 24 per cent. UltraTech and Shree Cement together will now account for 45 per cent of total installed capacity in the north. Ambuja Cements, with a 10 mt capacity is the third-largest in the region, followed by JK Lakshmi and JK Cement at 7.5 mt, respectively.
“These five together will account for 70 per cent of total installed capacity, implying strong market consolidation in the north”, the report said.
UltraTech said it had combined the acquired markets with its north and west zone operations. G Balasubramaniam, former unit head at its Awarpur plant, is now heading the integrated unit.
Sector analysts said given the superior limestone reserves and distribution reach, Binani Cement had been delivering average earnings before interest tax depreciation amortization (Ebitda) of Rs 700 per tonne between 2010 and 2013.
UltraTech said Binani’s expansion potential will enhance its competitiveness in the region and benefit consumers.