Lenders are cracking the deadlock of the piled-up debt of bankrupt companies, thanks to the Insolvency and Bankruptcy Code (IBC) 2016, but at a huge cost. Of the dozen beleaguered companies, Electrosteel and Bhushan Steel are being sold for a discount of 50% and 32% respectively.
Alok Industries, the third company, is fetching only 17% of Rs 29,500 crore sunk in the firm’s operations by lenders. It is being sold at the steepest haircut of 83% to the only bidder – a joint venture between Reliance Industries and JM Financial ARC. While Tata Steel buys Bhushan Steel by paying 78% of the outstanding debt, Vedanta Group is taking over Electrosteel by shelling out half of the total bad debt.
In the case of Alok, the lenders have not let go of the charge on the Rs 11,000 crore worth of existing receivables. This means that lenders, who have written off huge amounts of bad debt, will be able to recoup some after the fire sale.
Companies like Lanco Infratech and ABG Shipyard are heading for liquidation in the absence of any meaningful bid. But liquidation will render all workers jobless. In Alok’s case, the 10,000-strong workforce, around 40% being tribal, was up in arms against liquidation, citing job losses.
Source: DNA, June 26,2018