A tribunal in India’s Gujarat state agreed to start insolvency proceedings against Essar Steel India Ltd, the debt-laden mill owned by the billionaire Ruia brothers, according to people familiar with the verdict.
The Ahmedabad bench of the National Company Law Tribunal agreed to a petition from State Bank of India and appointed Satish Kumar Gupta of Alvarez & Marsal as the interim resolution professional, said the people, who asked not be identified as the document hasn’t been published. Gupta replaces the board and will run the company until a plan for loan repayment or insolvency is in place, they said. An Essar Steel spokesman confirmed that the case has been admitted.
The decision follows similar verdicts on Bhushan Steel Ltd and Monnet Ispat & Energy Ltd as the Reserve Bank of India seeks to resolve as much as $180bn of bad debt weighing down on the country’s banks. It opens the way for top producers such as JSW Steel Ltd or Tata Steel Ltd to acquire the companies. The NCLT also admitted Standard Chartered Plc’s insolvency plea on Essar Steel, the people said.
The corporate insolvency resolution process, where a repayment plan is worked out, must be completed within 180 days, with a 90-day extension allowed if needed, according to the Insolvency & Bankruptcy Code 2016.
The Gujarat High Court last month rejected Essar Steel’s efforts to halt the proceedings. Essar said it repaid Rs35bn ($550mn) of debt in the year to March 31 and is making “serious efforts” to revive operations and repay the rest, according to the court filing. The mill controlled by Shashi and Ravi Ruia has about Rs400bn of loans, company data show.
Employees walk past an Essar Group logo outside its headquarters in Mumbai. A tribunal in India’s Gujarat state agreed to start insolvency proceedings against the debt-laden mill owned by the billionaire Ruia brothers, according to sources.
