NCLT clears decks for Tatas' acquisition of Bhushan Steel

At 1.20pm Tata Steel shares were up 3.85% at Rs633.60 on BSE while Bhushan Steel shares rose 4.81% to Rs23.95

Tata Steel will now acquire debt-ridden Bhushan Steel as the National Company Law Tribunal approved its resolution plan on Tuesday rejecting the plea filed by employees of Bhushan Steel opposing Tata's bid. Lenders would be allotted equity shares by converting loan amount of Rs14.5cr at a face value of Rs2. Also, its wholly owned subsidiary, Bamnipal Steel, will subscribe to 72.65% of Bhushan Steel's shares for about Rupees 159 billion. It will be funded through a combination of equity and inter-corporate loans, of which upto Rs 9,000 crore loans have an option of conversion into equity shares of BSL.

Lenders would also invoke the pledge on existing shares of the former promoters, taking the overall stake of lenders to 14.2%.

The aggregate fund received by Bhushan from Tata through a mix of preferential share and loan would be to the tune of Rs 35,132 crore which will be utilised to settle the existing debts of Bhushan, cost of insolvency process and outstanding employees dues. However, reportedly, the resolution plan excludes operational creditors settlement amount of Rs 1,200 crore.

However, some employees of Bhushan Steel had challenged it before NCLT contending that Tata Steel was not eligible under section 29 (A) of the Insolvency and Bankruptcy Code (IBC).

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NCLT has also dismissed L&T's plea seeking higher priority in the recovery of a loan as the financial creditor and imposed Rs 1 lakh fine. So far, nearly all companies referred to the NCLT have been embroiled in pleas and counter pleas, with little heed paid to the 270-day deadline specified for insolvency resolution under the IBC.

The Bench, comprising NCLT President Justice MM Kumar and SK Mohapatra, also dismissed Bhushan Energy's plea to direct Tata Steel, the new owners of Bhushan Steel, to continue with its power purchase agreement.

Tata Steel would implement the resolution plan through its step-down subsidiary Bamnipal Steel. With Tata Steel tipped to enter into a joint venture with ThyssenKrupp of Germany for its European steel business, the focus is clearly back on growth in India.

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