Anil Agarwal-promoted Vedanta Ltd announced on Monday that it has acquired the control of Electrosteel Steels Ltd (ESL) under a resolution plan that became effective Monday.
"Pursuant to the order dated May 30, 2018 of National Company Law Appellate Tribunal, Vedanta is implementing the approved Resolution Plan for Electrosteel Steels Limited," the company said in a statement.
Accordingly, Vedanta Star Limited (VSL), a wholly-owned subsidiary of Vedanta, has deposited the upfront amount of Rs 53.2 billion in escrow account of ESL.
A new board of directors has been put in place for ESL. According to the company, Vedanta, which will hold 90 per cent in ESL will fund the investment through a combination of equity of Rs 17.65 billion and inter-corporate loan of Rs 35.55 billion.
The National Company Law Appellate Tribunal (NCLAT) had last Wednesday permitted Vedanta Ltd to make an upfront payment to the Committee of Creditors (CoC) for ESL.
With this, Electrosteel becomes the second steel company to see completion of insolvency process after Tata Steel took control of Bhushan Steel last month. This would also result in Vedanta's foray into the steel business.
Electrosteel has a planned steel-making capacity of 2.51 million tonnes and a commissioned capacity of 1.5 million tonne.
Vedanta said the Electrosteel acquisition will complement its existing iron ore business as the vertical integration of steel manufacturing capabilities has the potential to generate significant efficiencies.
While Electrosteel scrip has remained flat at the Bombay Stock Exchange closing marginally down at Rs 1.08, Vedanta ended the day at Rs 246.3.
Renaissance Steel India Pvt. Ltd, another bidder for Electrosteel, had appealed against April 17 order of National Company Law Tribunal’s Kolkata bench which approved Vedanta's resolution plan for Electrosteel.
Renaissance had contended that Vedanta was ineligible to bid under Section 29A of the IBC as one of Vedanta’s affiliates in Zambia—a unit of its UK-based parent Vedanta Resources Plc—had been found guilty of violating certain environmental laws, punishable with two or more years in jail.
Doubts were also cast on Vedanta's eligibility after death of protesters at the group company's copper plant in Tuticorin.
Renaissance Steel had also petitioned against another bidder, Tata Steel Ltd, claiming that its UK subsidiaries had flouted the UK Health and Safety at Work Act, and fines were imposed on it. Four companies had bid for Electrosteel--Vedanta, Tata Steel, Edelweiss and Renaissance Steel India.