The evaluation system will broadly be divided into quantitative and qualitative criteria
Anticipating intense buying interest, banks have set up an elaborate marking system to shortlist the bidders for Essar Steel. The company is in the National Law Tribunal (NCLT) for non-payment of bank dues estimated at Rs 45,000 crore.
The evaluation system will broadly be divided into quantitative and qualitative criteria, a senior banker said.
The quantitative marking, which will carry 70 marks, will be based on the the gains that banks could make on equity infusion. The marks will be for bringing in net present value and upfront cash.
For example, if the promoters bring in upfront cash, they will get 20 marks. If they get about 30% of the net present value (NPV) of the total resolution, they will get another 50 marks.
The qualitative criteria, which will include a track record of the bidders and the ability to turnaround the company, will fetch 30 marks.
"We have set up the evaluation criteria to ensure that the bidding process is transparent and fair. No bidder should dispute the process of selection. There will be marks for every criteria for bidders of Essar Steel so that there is a transparent process to select the new promoters who also have the managerial skills to run the plant," said a senior banker.
With four major steel companies in the fray, bankers are hoping to recover over 65% of the total debt extended to Essar Steel. Tata Steel, JSW, Arcelor Mittal, Nippon Steel are some of the top bidders for Essar Steel.
Improving outlook for the Indian steel sector is heating up the competition for buying the distressed steel assets. In order to make the bidding process completely transparent, banks have set up elaborate evaluation criteria for the prospective bidders. The winner of the bid would be marked on every single criterion.
The current owners Ruias, who owe the banks about Rs 45,000 crore, are exempted from bidding for the plant unless they clear their dues of Rs 3,000 crore.
Essar Steel is among 12 companies with high amounts of bad loans that have been referred by the Reserve Bank of India in June to the NCLT for insolvency resolution. Promoters of defaulting companies had intended to submit insolvency resolution plans in an effort to get their companies back, but an Ordinance promulgated in November made them ineligible to do so.
With the Lok Sabha passing amendments to the Insolvency and Bankruptcy Code (IBC), it allowed for promoters of defaulting companies to repay the amount overdue to qualify to bid for their own companies.
The outlook for steel sector has improved with Ebitda (earnings before interest, tax, depreciation and amortisation) margins of companies improving. Goldman Sachs said in a report, "Indian steel sector is in the midst of multi-year upcycle driven by higher spreads and rising capacity utilisation and improving iron ore supply."
MARKING SYSTEM
- The evaluation system will broadly be divided into quantitative and qualitative criteria
- The qualitative criteria, which will include track record of the bidders and the ability to turnaround the company, will fetch 30 marks
- The quantitative marking will be based on the gains that banks could make on equity infusion, which will be bringing in a 30% of net present value and upfront cash, both of which will carry 70 marks
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 "Essar Steel")
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