Lenders See More Recovery in Steel Sector

The surge in metal prices is enabling banks to better recover from steel non-performing assets (NPAs). Canara Bank-led lenders stand to rake in Rs 531 crore from the sale of Hyderabad-based Sathavahana Ispat where stressed assets investor JC Flowers Asset Reconstructi

BY Realty Plus
Published - Monday, 28 Jun, 2021

Lenders See More Recovery in Steel Sector

The surge in metal prices is enabling banks to better recover from steel non-performing assets (NPAs). Canara Bank-led lenders stand to rake in Rs 531 crore from the sale of Hyderabad-based Sathavahana Ispat where stressed assets investor JC Flowers Asset Reconstruction (ARC) outdid its own anchor bid. Earlier, SBI-led bankers made Rs 470 crore from the sale of Odisha-based MSP Metallics to CFM ARC. Both deals were outside the bankruptcy process. At a time when banks are seeing most of their loans wiped out, like those to Videocon Group or Jet Airways, the traditional business of steel manufacturing is turning out to be relatively safer for lenders. Three of the biggest NPA recoveries has been in the steel sector — Essar Steel, Bhushan Steel and Bhushan Power & Steel. What went in favour of the sector was the turning of the commodity cycle, which helped recoveries, and the fact that the plants continued to be operational despite being in the insolvency process. In the case of Sathavahana Ispat, JC Flowers ARC was initially the highest bidder at Rs 410 crore. Subsequently, Canara Bank ran a ‘Swiss challenge’ process where bidders get an opportunity to top the best bid. During this process, Megha Engineering bid Rs 531 crore. JC Flowers then exercised its right as an anchor bidder to match the bid. As a result, lenders are likely to recover more than half their dues. ARCs buy distressed businesses from lenders and consolidate the holdings and sell them for a profit. Last month, CFM ARC emerged as the top bidder for MSP Metallics, which has dues of around Rs 1,500 crore. Lenders are set to recover Rs 470 crore, which is much higher than their reserve price of Rs 370 crore.