Kirloskar Ferrous Industries is a wholly owned subsidiary of BSE listed Kirloskar Oil Engines Limited.
The non-binding offer is equal to 20 paise on Re 1 on the total loan including interest component. According to a disclosure made by the company to the Bombay Stock Exchange, ISMT had a debt of Rs 3,359 crore including interest as on June 30, 2020.
The lenders have appointed a law firm Desai Saxena & Associates (DSA) for the sale process. The DSA has fixed a reserve price of Rs 670 crore on the basis of a non-binding offer received from Kirloskar Ferrous, according to a notice uploaded on its website.
The law firm has invited expressions of interest by November 1 and firm bids by November 15 for assignment of loans from asset reconstruction companies and alternative investment firms, according to the same notice.
After receiving a firm offer, lenders can hold a Swiss challenge auction, said one of the persons cited above.
The BR Taneja-promoted ISMT has been in default since 2013, resulting in loan restructuring by lenders, said a banker with the defaulting steel company.
In recent years, Avenue Capital-backed Asset Reconstruction Company of India (Arquil) acquired ISMT’s rupee loans from State Bank of India, Indian Overseas Bank, Bank of Maharashtra, Bank of India and IDBI Bank, while Edelweiss ARC Received Rupee loan from ICICI Bank. .
Subsequently, if the company is admitted to the Corporate Insolvency and Resolution Process (CIRP), Archil holds a majority of over 67 per cent of the total debt – enough to block a resolution. As per the Insolvency and Bankruptcy Code, any major decision under the CIRP requires the approval of at least 66% of the lenders by value.
The remaining lenders – Bank of Baroda, Union Bank of India, Central Bank of India and IKB Deutsche Industriebank AG – continue to have rupee exposure to the company. ISMT has foreign exchange exposure as per its annual report to the tune of Rs 271 crore, of which few Indian banks have exposure.
Its steel plant is located in Jejuri, Pune, close to the headquarters of the Kirloskar Group, while Kirloskar Ferrous has two pig iron plants in Karnataka.
Kirloskar Ferrous Industries did not respond to requests for comment.
The Kirloskar family recently came into the limelight for a family dispute regarding a family settlement relating to the assets of the over 130-year-old Kirloskar Group. Sanjay Kirloskar, who controls Kirloskar Brothers Ltd, has alleged in a letter to SEBI Atul and Rahul Kirloskar – which jointly control Kirloskar Oil Engines Ltd., Kirloskar Industries Ltd., Kirloskar Pneumatic Co. Ltd. and Kirloskar Ferrous Industries Ltd. – allegedly attempt to usurp Kirloskar’s legacy.