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Banks fret over Rs 40,000 crore loan to Bhushan Steel

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Lenders to the troubled Bhushan Steel called an emergency meeting in Mumbai on Wednesday to step up pressure on the company to bring in promoter's equity of Rs 1,000 crore, so that the restructuring process can go on stream and prevent the account from turning a bad loan.

Heads of all major public sector banks participated in the meeting. A senior banker who attended the meeting told dna: "Bank chiefs have reiterated to the company to sell off all its marketable assets so that there are cash flows into the company. Banks have asked the company to sell off its Khopoli plant, near Pune, where the company converts flat steel to finished auto components part. The company will have to explore selling all assets it has, so that operating costs are minimised and cash flows generated."

With close to Rs 40,000 crore of bank money at stake, lenders have formed a steering committee with representations from State Bank of India, Punjab National Bank, Bank of India, Bank of Baroda and IDBI Bank to closely monitor the functioning of the company. Two bankers from SBI and PNB are already on the board of the company.

Another banker, who is also in the consortium, said the company sold off its oxygen plants but the money still is yet to come from the buyer."

However, bankers fear that the loan may slip into a default with Bhushan posting a net loss of Rs 141.63 crore in the quarter ended June 30 as against a net profit of Rs 76.26 crore in the same period a year ago.

A banker, who is part of the consortium, said, "The company needs to co-operate with bankers to take whatever steps are required to ensure cash flows. The company went on an aggressive expansion, so they also have to sell off these power plants, which are not captive."

The company blames the fire at its steel plant in Odisha's Dhenkanal district in November last year for its present state of affairs. After the fire, Bhushan Steel had to devise corrective action plans along with bankers to get out of stress.

Bhushan Steel was sanctioned around Rs 6,900 crore by banks for restarting operations at its Odisha plant which caught fire. The company has received Rs 3,000 crore, and the remaining portion of the funds are expected to be disbursed.

As per the restructuring plan, company was asked to sell its non-core assets and lease them back, or raise funds through qualified institutional placement, which would have led to reduction in promoter holding.

Out of the three plants, its Khopoli (Maharashtra) and Sahidabad (Uttar Pradesh) plants are running at 90% capacity. The third plant at Dhenkanal was shut for 6-7 months and is currently running half its capacity.

As on January 1, the company's market cap has shrunk nearly one-sixth to Rs 2,001 crore as its share price tanked from Rs 480 levels to Rs 88.35 over the last one year. The promoters, Singal family, holds a 63.24% stake with Brij Bhushan Singhal, founder chairman, holding 19.31% stake, as on quarter ended September 2014

Bhushan Steel is India's third-largest secondary steel producer company with an existing capacity of 2 million tonnes per annum.

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