Dalmia moves CVC for Binani Cement as lenders back Ultratech
10 April 2018
Dalmia Bharat has sought the Central Vigilance Commission’s (CVC) intervention in the Binani Cement bankruptcy proceedings, after the lenders backed out of the bidding process in which Rajputana Properties, a subsidiary of Dalmia Bharat, emerged as the highest bidder for the bankrupt company.
With backing from lenders of Binani Cement rival bidder Binani Industries (BIL) also on Monday moved the Supreme Court seeking permission for an out-of-court settlement with banks to end insolvency proceedings initiated against its subsidiary Binani Cement.
Against Binani Cement’s overdue loans of more than Rs7,000 crore, Dalmia Bharat had offered Rs6,700 crore for its assets.
However, Dalmia Bharat holds that the lenders’ reported move to allow the promoters to seek an out-of court settlement for the debt-laden business violates CVC guidelines and circumvents the insolvency process.
In a letter to the CVC, the New Delhi-based cement maker wanted the commission to examine the matter and pass suitable guidelines in public interest, as reports have started trickling that the lenders are having a change of heart, and could back the deal with UltraTech. The deal with UltraTech looked more attractive for lenders as the amount offered is higher and would amount to 100 per cent payout to both unsecured and secured creditors.
Binani Industries on Monday moved an application before a bench led by Chief Justice Dipak Misra for an out-of-court settlement with UntraTech who said that it will be taken up for hearing on 13 April.
Listing the events since February 27, when Rajputana Properties (subsidiary of Dalmia Bharat Cement) was adjudged the highest bidder by lenders, Dalmia has gone on to outline instances that it believes go against the CVC guidelines.
“The unsuccessful bidder, UltraTech Cement, sent mails to CoC (committee of creditors) members revising its offer upwards on March 8, 2018 and requested CoC to consider its revised offer despite being well aware that the bidding process did not allow submission of revised bids. Shockingly, two PSU lenders (EXIM Bank and SBI Hong Kong) who are part of the CoC petitioned the NCLT seeking directions to CoC that negotiations also be done with the H2 bidder. These actions are in clear violation of CVC guidelines for closed bids,” the letter said, mentioning two CVC circulars dating back to 2007 and 2010.
“The CVC will be taking its own action. Let the IBC be saved,” Mahendra Singhi, group CEO, cement, Dalmia Bharat said.
The letter also said that apart from violating CVC guidelines and shaking public confidence in the bankruptcy code, the settlement between Binani and the lenders will also “send a wrong message to the international investing community, whose participation in resolving mounting NPAs of the banking sector is vitally important and in public interest.”
Dalmia was referring to the participation of Bain Capital Credit in the consortium that also includes Ajay Piramal's Piramal Enterprises.
The lenders in a meeting on Saturday have decided to conditionally back the deal between promoter Binani Industries and UltraTech should it get Supreme Court approval. Binani Industries has deposited a sum of Rs750 crore to show its commitment, along with a bank guarantee for the remaining amount of the total offer of Rs 7,266 crore.
UltraTech will pay Binani Industries Rs7,266 crore for the purchase of its 98.47 per cent stake in Binani Cement.