A group of Indian banks, seeking to recoup $5.9 billion owed them by Bhushan Steel Ltd., will carry out a forensic audit of the company and push it to sell assets after its managing director was arrested for alleged bribery.
Bhushan should “monetize non-core assets,” Punjab National Bank, one of the banks, said in a statement today after a lenders’ meeting. The banks will appoint three directors to Bhushan’s board and name an auditor to monitor cash flow. The company has been asked to fix a time frame for selling assets. PNB and State Bank of India are the biggest lenders to Bhushan.
The Central Bureau of Investigation, an Indian federal investigating agency, registered a case against Bhushan Managing Director Neeraj Singal on Aug. 2. for allegedly bribing S.K. Jain, chairman of state-owned Syndicate Bank, 5 million rupees ($82,066). Jain was arrested on Aug. 3 and Singal on Aug. 7.
Bhushan defaulted on a loan repayment to Syndicate and Singal was seeking favors for his company, Swarana Kanta Sharma, a special CBI judge said in her Aug. 6 order, following the hearing on Singal’s anticipatory bail application.
The CBI case was based on presumptions and incorrect information, Singal’s counsel D.P. Singh was cited as saying in Aug. 6 court documents.
Shares of the New Delhi based steelmaker have fallen 66 percent since Aug. 2. They declined 5 percent to 152.60 rupees in Mumbai trading today, valuing Bhushan at 34.57 billion rupees ($567 million).
The company’s debt more than doubled in three years from $2.8 billion in the 12 months ended March 2011 after Bhushan borrowed to build a 1.9 million metric-ton blast furnace and steel-processing unit.
Bhushan is now in the final phase of a $3.2 billion plan to raise annual capacity to 4.4 million tons from 1.9 million tons and produce high-value steel products, according to a company presentation on its website. It has already spent 84 percent of the project cost.
State Bank has lent 60 billion rupees to Bhushan, Chairman Arundhati Bhattacharya said on Aug. 8.