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'Resolution of Bhushan Steel bankruptcy is credit positive for banks'

Press Trust of India  |  New Delhi 

resolution of Bhushan Steel, largest among the companies undergoing the process, will be a positive for its lenders, said today.

is one of the 12 large non-performing assets (NPAs) held by Indian banks that lenders last year took to (NCLT) for a resolution under the Insolvency and Bankruptcy Code (IBC).

"We expect most rated Indian banks to have some exposure to and the resolution will particularly benefit State (Baa2/Baa2 stable, ba1), the of the consortium of lenders to Bhushan Steel," Moody's said.

About 40 per cent of Indian banks' NPAs are undergoing resolution under the NCLT, which started in July 2017, the agency said.

The constitutes the largest industry, with a share of about 35 per cent of these NPAs. Within the sector, is the largest account representing about 40 per cent share.

The company owes Rs 44,478 crore to its lenders. As per Bhushan Steel's website, it is the third largest in the country with annual capacity of 5.6 million tonne.

Tata Steel, one of the bidders for Bhushan Steel, has said it has been identified as the highest bidder for acquiring controlling stake in the debt-ridden firm undergoing insolvency proceedings.

Besides Tata Steel, (a joint venture between JSW and Piramal Enterprises) and a consortium of the Bhushan Steel's own employees had also submitted bids to take over assets of the bankrupt firm on February 3, 2018.

The agency also said that meaningful resolutions of NPAs would significantly improve banks' asset quality metrics. Beyond asset quality, the effect on profitability and capital will depend on the haircuts that lenders take in the resolution process.

"In this context, the Bhushan Steel transaction is an important milestone, because it is the first and largest of the 12 large non-performing asset in the NCLT resolution process. If the other are resolved with similar haircuts, many banks can expect a positive effect on profitability and capital," it added.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, March 09 2018. 16:45 IST