Lenders invoke shares pledged by Bhushan Steel to raise Rs 300 cr

Lenders have invoked shares pledged by scam-ridden Bhushan Steel to make good for the losses they incur due to the fall in stock prices, according to data available on the stock exchanges. The share sale is likely to have helped the financiers raise about Rs 300 crore. According to the company’s disclosure to the stock exchanges, IFIN Security, ECL Finance, L&T Fincorp, JM Financial, Aditya Birla Finance, Sicom and Kotak Mahindra Bank have sold 13.90 million shares of the company during 4 August to 13 August. Promoters pledge shares to raise money from a lender. A fall in the prices of shares reduces the value of pledged shares, forcing the lenders to sell the shares in the market to make good for the loss of the value of the collateral. The shares of Bhushan Steel have been on a downhill ride ever since the CBI unearthed a bribery scam on 2 August. The CBI had arrested Syndicate Bank CMD SK Jain for allegedly accepting a Rs 50 lakh bribe for extending credit facilities to the company. Bhushan Steel Vice Chairman and Managing Director Neeraj Singal was also arrested by the investigative agency in connection with the scam. According to reports, the stock has nosedived about 70 percent over the last one year, when financial stress on the company came to light. The net debt on the books of Bhushan Steel as of end-March 2014 was Rs 35,142 crore, significantly up from a year-ago. Over the three-month period of April-June, the company’s debt saw a 5,000 crore spike. The consortium of 51 banks, lead by Punjab National Bank, has ordered a forensic audit into the books of account of the cash-starved company and asked its promoters to infuse more capital to ensure that it remains solvent, a PTI report said yesterday. The consortium will also appoint three nominee directors on the board representing the lenders. According to a PTI report, in order to overcome tight cash situation, bankers on Monday asked the company to de-leverage by bringing in equity, including monetising non-core assets. “However, the company requested for some time given the prevailing circumstances. Since the equity infusion will take time, lenders advised the company to monetise the non-core assets which was agreed to by the company as a part of deleveraging exercise and the company was also advised to come with a definite time frame,” the report said quoting a PNB statement. Shares of Bhushan Steel are stuck at 5 percent lower circuit today at Rs 137.7 on the BSE.