Lenders empower PNB to initiate insolvency proceedings against Bhushan Power

Mumbai: Lenders to

Bhushan Steel and Power

— the largest borrower among the 12 defaulting companies identified by the Reserve Bank of India — have given the mandate to Punjab National Bank to proceed against the steelmaker under the Insolvency and Bankruptcy Code.

Among the 31 banks that have lent to

Bhushan Steel

and Power, PNB has a sizeable exposure. Banks will now make an application under the IBC with the National Corporate Law Tribunal. The new legislation requires that if a resolution package is not agreed upon within 270 days, insolvency proceedings will start against the defaulter.

Lenders will also need to appoint an insolvency professional. With this the total tally of companies against which banks have proceeded under the IBC has gone up to eight.

The companies against which lenders have already invoked the insolvency code include;

Essar Steel

, Bhushan Steel,

Electrosteel Steel

,

Monnet Ispat

, Jaypee Infratech,

Jyoti Structure

and Lanco Infratech.

Bhushan Steel and Bhushan Power promoters are part of the same family. However, the family had split in 2004 and by 2011 the promoters had completely separated cross shareholding. Brij Bhushan Singal and his younger son Neeraj Singal control Bhushan Steel while the unlisted Bhushan Power and Steel is controlled by Brij Bhushan’s elder son Sanjay Singal. Following the family split, lenders have been treating the two as different groups for the purpose of exposure norms.

Lenders are yet to decide on Era Infra Engineering, ABG Shipyard, Alok Industries and Amtek Auto — the remaining four companies on the RBI list. Of the 12 companies referred by RBI six listed companies closed lower. ABG Shipyard and JP Infratech closed over 4% higher while Bhushan Steel traded flat.