Vedanta pays Rs5,320 crore for Electrosteel acquisition
Vedanta now holds 90% of the paid-up capital of Electrosteel Steels Ltd and has appointed a new board of directors
Mumbai: Billionaire Anil Agarwal’s Vedanta Ltd has taken over on Monday control of bankrupt company Electrosteel Steels Ltd, the former said in a regulatory filing.
In its note to stock exchanges, Vedanta Ltd said that its fully-owned subsidiary Vedanta Star Ltd (VSL) has deposited an upfront amount of Rs5,320 crore in an escrow account for the Electrosteel acquisition.
VSL has funded this acquisition by way of equity infusion of Rs1,765 crore and an inter-corporate loan of Rs3,555 crore. VSL now holds 90% of the paid-up capital of Elelctrosteel and has appointed a new board of directors.
This acquisition marks Vedanta’s entry into steelmaking in India. Electrosteel has a steel manufacturing capacity of 1.5 million tonnes per annum (mtpa) in Bokaro, Jharkhand. VSL believes the plant’s capacity can be increased to 2.5 mtpa.
Last week, the National Company Law Tribunal allowed Vedanta to make the upfront payment that would seal its takeover of Electrosteel. However, the court has reserved its verdict on Vedanta’s eligibility to take over the debt-ridden steel company. Renaissance Steel, which had also bid for Electrosteel, contends that Vedanta is ineligible under Section 29A of the Insolvency and Bankruptcy Code (IBC) as one of Vedanta’s affiliates in Zambia — a unit of its UK-based parent Vedanta Resources Plc—had been found guilty of violating certain environmental laws.
This is the second company in the RBI’s dirty dozen list of toxic corporate borrowers, which have been sold to new owners under IBC. In May, Tata Steel acquired the distressed assets of Bhushan Steel for Rs35,200 crore.
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