SBI-led lenders drag Essar Steel, Bhushan Steel, Electrosteel to National Company Law Tribunal over NPA recovery

State Bank of India (SBI) led forum of lenders on Thursday sent three large non-performing accounts Bhushan Steel, Essar Steel and Electrosteel Steels to the National Company Law Tribunal (NCLT) for further action under the Insolvency and Bankruptcy Code (IBC). 

The three companies have debt to the tune of Rs 1 lakh crore that has turned bad. While unlisted Essar Steel had a consolidated debt of Rs 37,284 crore, Bhushan Steel’s debt stood at Rs 44,478 crore at the end of 2015-16. The latest financial numbers of both companies are not available as yet, but bankers said the debt would have gone up in the last one year. Kolkata-based Electrosteel Steels had a debt of Rs 10,274 crore at the end of March 2016.

The Reserve Bank of India (RBI) had made a shortlist of cases based on the 2015-16 debt position. A senior public sector bank executive said lenders would now have to protect the value of assets and minimise haircuts on these loans. Large haircuts would eat into already scarce capital, especially of the public sector banks. 

Though the fortunes of the steel sector have improved because of a rise in steel prices in the last one year and imposition of the import duty on cheap Chinese imports, this was not enough to take these companies out of the woods. 

“Some steel companies did manage to pay the interest component, but this is not enough to pay the principal part of the loan. For that steel prices would need to go higher,” said a banker who did not wish to be named.