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How Piramal Group plans to spread its wings

November 03, 2017 16:20 IST

Piramal will join the JSW, Vedanta and Tata groups, which are bidding aggressively for distressed assets, especially in the infrastructure and steel sectors.

The cash-rich Piramal Group is in the race to buy controlling stakes in Binani Cement and Electrosteel Steels after their lenders asked India’s top conglomerates to bid for distressed assets that have been referred to the National Company Law Tribunal (NCLT) following default on bank loans.

 

The distressed asset fund of the Piramal Group would make the bids and had sought data from the lenders on the two companies, said a source close to the development.

The NCLT had, in July, admitted a petition against unlisted Binani Cement for insolvency proceedings after the company defaulted on a Rs 97-crore loan to Bank of Baroda.

Binani Cement owed Rs 3,700 crore as of March 2016 to Indian lenders led by Edelweiss Asset Reconstruction Company.

The company, with 11.25 million tonnes of global capacity and a domestic capacity of 6.25 million tonnes, had also drawn attention from other cement makers, a lender said.

In financial year 2016-17, Binani reported sales of Rs 1,535 crore and a loss of Rs 349 crore, as against net sales of Rs 2,038 crore and a loss of Rs 375 crore in the financial year ended March 2016.

With debts of Rs 10,288 crore, Electrosteel Steels is among the 12 companies identified by the Reserve Bank of India for continuous default. In 2016-17, Electrosteel Steels’ sales were Rs 2,541 crore and it made a loss of Rs 1,464 crore (see chart).

Six companies - Srei Infrastructure, Tata Steel, Mesco Steel, Edelweiss, Avalokiteshvar Valinv and Electrosteel Castings - formally expressed an interest in the firm last week.

Lenders said in the subsequent bidding stage, they had asked the Piramals to join one of the companies that had submitted expressions of interest for Electrosteel Steels.

Lenders said the bidders were seeking a haircut up to 60 per cent on loans provided to these companies so as to make the assets attractive.

Piramal will join the JSW, Vedanta and Tata groups, which are bidding aggressively for distressed assets, especially in the infrastructure and steel sectors.

According to a source, banks are asking the Piramals to bid because they have the financial muscle and the management bandwidth to take over these companies and turn them around.

According to lenders, the Piramals have set up an in-house distressed asset fund in association with Bain Capital Credit and see a $1 billion investment opportunity in distressed assets over the next few years.

Both Piramal and Bain plan to pour their own funds and raise the balance from other institutional investors in foreign and domestic markets.

The focus of Piramal’s fund would be to acquire large borrower assets from banks and financial institutions and work towards their revival and turnaround, said a source.

The Aditya Birla group has already taken over the Jaypee group’s cement assets for Rs 16,000 crore in 2016 and the Adanis have bought Lanco’s Udupi power plant and L&T and Tata Steel’s port in Dhamra.

Neither conglomerate was likely to be interested in the assets currently on offer, said a banker.

Photograph: Danish Siddiqui/Reuters

Dev Chatterjee in Mumbai
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