UltraTech makes fresh Rs7,266 offer; Binani appears to favour it

In what could lead to a prolonged legal battle, UltraTech Cement on Monday announced a decision to take over bankrupt Binani Cement with an offer of Rs7,266 crore. This comes after it lost out to rival, a the Dalmia Bharat-led consortium in a bidding process initiated by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code 2016.

The surprise move by the Aditya Birla Group firm poses a challenge to the nascent bankruptcy resolution process. Rival cement maker Dalmia Bharat had virtually bagged Binani Cement for Rs6,350 crore last Wednesday in the court-supervised process and also promised a 20 per cent stake to the lenders to whom Binani's promoters owe Rs4,200 crore.

The development came soon after UltraTech Cement Ltd alleged lack of transparency in the bidding process, saying the bankruptcy resolution process at Binani Cement was "shrouded in secrecy" with bidders not allowed to participate in meetings, and "the Aditya Birla Group will not take this lying down" (See: UltraTech to challenge Binani sale to Dalmia-led consortium).

In the twists that started Monday morning, Ultratech gave a 'comfort letter' to Binani Cements earlier this morning offering Rs7,266 crore for a 98.43-per cent stake, which will bail the crippled company out. The offer is contingent on the resolution case moving out of the NCLT.

Both the companies separately moved the National Company Law Tribunal in Kolkata, which is overseeing the debt resolution since July last year.

During the bidding that ended two weeks ago, the Dalmia-led consortium had bid the highest at Rs6,350 crore while UltraTech bid Rs6,200 crore. It has now raised the bid by Rs1,066 crore to quote Rs7,266 crore.

UltraTech said in a statement that its Board has approved Binani Industries Ltd's request for "arranging funds to pay off the lenders' debts and other liabilities in line with the Insolvency and Bankruptcy Code (IBC) proceedings".

UltraTech has also entered into an in-principle commercial understanding with Binani for the purchase of 98.43-per cent of the shareholding of BCL. Its offer is subject to the termination of IBC proceedings and entering into definitive agreement, other customary and regulatory approvals, the company said in the statement.

Sameer Kaji, senior advisor for Binani Industries, said in a press conference on Monday that the company has sought to withdraw itself company from the ongoing bankruptcy proceedings as the bidding was not run on a transparent process.

Thus both UltraTech and Binani have alleged lack of transparency in the bidding process, and being kept out of critical discussions by the resolution professional.

Speaking to reporters at a Binani group office in Mumbai late this on Monday evening, its corporate strategy advisor Sameer Kaji said that "maximising value" is the key objective of the bankruptcy process and claimed that this deal (with UltraTech) addresses that the best. He declined to comment on the 20-per cent stake offered by Dalmia to lenders. Kaji also said Binani has not contacted the lenders since the fresh turn of events.
The companies are relying on a provision in the Insolvency and Bankruptcy Code that gives the NCLT the powers to terminate an ongoing resolution process.

UltraTech managing director K K Maheshwari at a separate press conference on Monday evening said their offer rests on "strong merits".

When asked if this sets a bad precedent for the NCLT-driven resolution process, given that the courts are seized of the matter since last July and a deal has been stitched with a rival, Kaji said resolutions under the IBC framework are "changing and evolving" regularly and lead to learning at every stage.

When asked whether their revised offer will pass the legal muster, Maheshwari said, "The court has to decide what is fair and equitable treatment needed."

On the timing of the deal, Kaji said the Birla group approached them and added that all of it happened "only today".

"For us, the process is not complete. When you've somebody bidding X, and Y bidding X-plus something, why would you accept X? Who says the process is over? We're questioning the basic process, which was not run transparently," Kaji claimed. He also alleged that the NCLT had sought the presence of the resolution professional on Monday, which was not acceded to. The next hearing for the case is on 22 March.

Binani Cements has a total liability of Rs5,960 crore and the extra money will be distributed among the shareholders of the company, Kaji said, adding that over 40,000 shareholders stand to benefit.

When asked about funding the deal if it goes through, Maheshwari said Ultratech is a zero-debt, cash rich company which can arrange the required Rs7,266 crore within 24 hours.

He claimed that 50 per cent of its acquired assets are doing extremely well and added that its capacity utilisation at the recently acquired Jaypee Cement's 21 million tonne has gone up to 75 cent from a low 18 per cent when they bought them.

Filing a contempt plea against RP and representatives of Deloitte who are assisting the resolution plan, Binani Industries (the parent of the cement company) has asked the NCLT Appellate Tribunal to declare the meeting of committee of creditors of Binani Cement held on 14 March in which the bid of Dalmia Bharat Cement was approved as "null and void".

It also raised questions over the valuation of Dalmia Cement by the RP in the resolution process and alleged that he is conducting the process in a manner that is detrimental to the interests of the company.

Ultratech Cement is the leader in the cement industry with a 92.5 million tonne installed annual capacity, and the fourth largest in the world excluding China. Binani Cement has an installed capacity of just 6.25 million tonne.