IDBI Bank starts bankruptcy process against Odisha Slurry

MUMBAI: IDBI Bank has initiated bankruptcy proceedings against Odisha Slurry Pipeline Infrastructure (OSPI) to recover Rs1,670 crore collectively on behalf of lenders, complicating the company’s proposed sale and creating uncertainties over the debt resolution at Essar Steel.

This development comes at a time when Numetal, a joint venture between Russia’s VTB and Rewant Ruia (a member of the Ruia family), has proposed to buy both Essar Steel and OSPI. The latter owns a 253-km slurry pipeline that moves iron ore from its base in the Orissa hinterland to Essar Steel’s pellets plant. Two senior banks officials told ET that IDBI bank has referred OSPI to the Kolkata bench of National Company Law Tribunal on Monday. The lender has suggested Ashish Chhawchharia, backed by consulting firm Grant Thornton, as the interim resolution professional.

The Ruias-promoted Essar Steel, which has Rs49,000 crore in dues to banks, is facing bankruptcy proceedings. It has received just two offers — one from billionaire LN Mittal-promoted ArcelorMittal and the other from Numetal. The resolution professional has not yet declared the highest bidder but both companies are engaged in a bitter fight, publicly claiming that the other is ineligible to bid.

Numetal and Essar Steel did not respond to emails sent by ET. OSPI is already facing ownership litigation, with lenders claiming that it is owned by Essar Steel. Srei Infrastructure, on the other hand, says that a venture floated by it owns the majority stake in the company. OSPI transports raw material from Orissa mines to the Essar plant and in absence of the pipeline, the cost of transportation would be about Rs3,000 crore annually.

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Lenders decided to refer the company to NCLT after Numetal proposed to buy out banks opposing its purchase of the OSPI stake from Srei infrastructure. The Delhi High Court has ordered a stay on the stake sale.

Furthermore, the resolution professional, Satish Gupta, who is backed by Alvarez & Marsal, has not admitted the lenders’ claims for OSPI while calculating the dues of Essar Steel. Srei Infrastructure did not respond to an email by ET.

“It’s a tricky situation. If some lenders decide to accept cash payment from Numetal to exit the company the matter would get further complicated. At this point of time, if it important for the lenders to be united,” said one of officials aware of the development.

Bankers believe that once the company is admitted into NCLT, the standstill clause would come into effect, preventing lenders from selling their loans to Numetal.

“Secondly, the buyer for Essar Steel will want to have full access to the pipeline, failing which the negotiating power of lenders would become weak,” he added.