We’re hoping the RBI will make deeper concessions in external commercial borrowing norms, says Rao
Rao says companies are finding it difficult to access capital both locally and overseas
Cases under the Insolvency and Bankruptcy Code (IBC) need to be resolved in a time-bound manner, or it may go the way of the Sarfaesi Act, said Seshagiri Rao M.V.S., joint managing director and group chief financial officer, JSW Steel Ltd. In an interview, Rao said companies are finding it difficult to access capital both locally and overseas. Edited excerpts:
You have several cases under IBC that are of interest to you. Is there an end in sight for the resolution of your Bhushan Power and Steel bid? Where do you stand on the Essar Steel case?
The National Company Law Appellate Tribunal (NCLAT) and Supreme Court have to give their judgements in the case of Bhushan Power. It is anybody’s guess right now what the judgement will be. Assuming the courts will permit the committee of creditors (CoC) to submit the successful resolution plan, which is still only stage 1. After that, the National Company Law Tribunal (NCLT) will have to approve the plan and during that period, anybody can appeal. Assuming there is no additional litigation, we have some visibility on the case on the assumption that the judgement will be in favour of the CoC.
Regarding 12A, there was a judgment by the Supreme Court that withdrawal of reference to IBC is allowed if 90% of creditors agree, and it is not necessary that this should be before submission of expressions of interest. I think this opens up again the opportunity for existing promoters (to regain their assets) if they are willing to pay 100% of outstanding liabilities. About Essar Steel, I would prefer not to comment on that.
Monnet Ispat, though it has come under your control, is still the subject of litigation from operational creditors like IFCI and Bharat Heavy Electricals Ltd who haven’t received any settlement in the resolution process.
In the case of Monnet, there are already 3-4 cases of litigation that have come up. The management has changed, the resolution plan is being implemented. So, how any of this gets resolved we have to see and the new management’s time is spent on dealing with all this litigation.
Regarding BHEL’s and IFCI’s contentions, I don’t know what view the courts will take. My interpretation of the Binani Cement judgement is that you cannot differentiate between similarly placed creditors. I may differentiate between unsecured and secured financial creditors (in a resolution plan) but I cannot differentiate between different unsecured financial creditors. But whether this is a correct interpretation, that has to be tested in court. How do we classify secured, unsecured, operational, contingent liabilities, which liabilities get extinguished and which don’t get extinguished as part of the resolution plan, all of these segments are going to face litigation and are going to be tested in court.
Are you willing to pay extra to creditors to settle litigation?
100% no. We have put money on the table, how it gets distributed is decided by the creditors. They have taken a call on this. If it is to be re-distributed otherwise, they (financial creditors and banks) have to give their share to someone else.
The IBC is meant for time-bound resolution of cases, in my personal view, rather than prolonging the case. Besides this, the maximization of value is a big driver and the interest of all stakeholders should be taken care of, because it is resolution and not liquidation. Some finality has to come in all these areas quickly. It should not become another Sarfaesi Act.
The industry is complaining of poor access to credit. How is JSW dealing with this?
The big problem is capital—credit is not available. Adding to the non-availability of credit, large corporate borrowers are being discouraged from borrowing. We’re hoping the RBI will make deeper concessions in external commercial borrowing (ECB) guidelines. Whatever earlier flexibility we had under ECBs has now been taken away. The ability to raise debt through the FPI route, there are so many conditions on that as well. There are so many restrictions on credit availability in the local market and the international markets.