For capital-starved IDBI Bank Ltd, UltraTech Cement Ltd’s winning bid for insolvent Binani Cement Ltd was good news: the cement maker owed it ₹1,600 crore, and UltraTech had promised to repay lenders. But now, the bank must wait.
According to two people familiar with the matter, the way it made the loan—through its Dubai branch to a Binani group company in Belgium—has become a sticking point, with the Reserve Bank of India (RBI) sending IDBI Bank a set of questions. Without RBI’s permission, IDBI Bank cannot receive money from UltraTech Cement or remit it to its Dubai branch.
According to the people cited above, who spoke on condition of anonymity, the loan was originally given to 3B-The Fibreglass Co., a Binani group firm in Belgium, but as the loan was guaranteed by Binani Cement, IDBI Bank was allowed to recover its loan through the insolvency process.
“We need RBI permission to remit the money to the Dubai branch where the loan was given in euros,” the first of the two people cited above said. This person added that the central bank has sent a set of questions to IDBI Bank and the approval of the transaction is contingent upon receiving satisfactory reply from the bank.
The second person quoted above said senior IDBI Bank officials are planning to meet RBI deputy governor B.P. Kanungo to clarify its position on the transfer of funds. “This money would substantially aid our recovery efforts,” the second person said, adding UltraTech agreed to pay the entire principal of ₹1,600 crore.
In February 2012, Binani Industries Ltd, the holding company of the Binani Group, acquired 3B-The Fibreglass Co. Based in Battice, Belgium, 3B is Europe’s leading manufacturer of fibreglass for reinforcement of thermoplastics and thermoset polymer applications.
Binani Cement is part of the Braj Binani Group and is a unit of Binani Industries Ltd (BIL), which is the holding company of the group, and which has presence in business areas including cement, fibreglass, infrastructure and energy.
The loan recovery is vital for the public sector lender struggling with bad loans of ₹60,875 crore, forming 32% of total loans.
IDBI Bank’s total capital adequacy ratio has, in fact, slipped below the regulatory requirement of 9% and stood at 6.22% as on 30 September 2018. The bank is also on the cusp of a major change as the government gives up its majority stake in the bank to Life Insurance Corporation of India (LIC).
Emails sent to IDBI Bank and the RBI seeking comments remained unanswered till publishing of this story.
Last month, the Supreme Court had upheld an order of the National Company Law Appellate Tribunal (NCLAT) approving UltraTech’s revised ₹7,900 crore bid to buy debt-laden Binani Cement.
On 14 November 2018, a two-member bench of NCLAT had dismissed a plea by Rajputana Properties Pvt. Ltd, owned by Dalmia Bharat Ltd, saying its offer for Binani Cement was “discriminatory” against some financial creditors. The dispute is related to a decision by Binani Cement’s committee of creditors to consider an improved bid from UltraTech Cement after Rajputana Properties’ ₹6,930 crore offer was declared the highest, and filed with the Kolkata bench of the bankruptcy court for its approval.
Mint reported on 12 January 2018 that at least two lenders of Binani Cement moved the appellate bankruptcy tribunal after the resolution professional (RP) rejected their claims on corporate guarantees worth ₹2,000 crore issued by the firm to some subsidiaries in the Binani group.
Banks, including IDBI Bank and SBI, had lent money to some companies in the Binani group, after Binani Cement issued corporate guarantees worth ₹2,000 crore for these loans.
In July 2017, National Company Law Tribunal (NCLT) bench in Kolkata had admitted the insolvency petition against Binani Cement. State-owned lender Bank of Baroda (BoB) had referred the company to the NCLT after it failed to repay around ₹100 crore, following which Vijaykumar V. Iyer of Deloitte India was appointed as the resolution professional.
Source: Livemint, December 13, 2018