Liberty paid Rs 262.45 crore plus interest of Rs 8 crore to take the Nellore based steel company, its second acquisition through the bankrutpcy process after acquiring the bankrupt Adhunik Metaliks and its associate Zion Steel in February 2020 under the insolvency law in a Rs 425 crore cash deal.
SBQ’s acquisition was less than the inital liquidition value of Rs 472 crore and a whopping 94% haircut to the Rs 4300 crore principle and interest due to financial creditors led by Edelweiss Asset Reconstruction Co, Union Bank of India and Bank of Baroda.
“Liberty outbid Switzerland based IMR Mettalurgical Resoruces to emerge the highest bidder during liquidation with a Rs 262 crore offer in August. However the company could not pay in three months stipulated. Earlier this month NCLT directed Liberty to make the payment in two days which was done last week,” said RK Bansal, CEO Edelweiss ARC which owns 82% of the debt.
Liberty and IMR were among the bidders for SBQ in the initial bids in 2018 but both did not make the cut with lenders. After a buyer could not be found, resolution professional Ashish Arjunkumar Rathi put the company into liquidation.
“The company had to go through three rounds of liquidation before finding a buyer. As a result the reserve price fell to as low as Rs 218 crore because of lack of buyers even during liquidation. IMR has agreed to pay Rs 200 crore in January this year but reduced the price to Rs 190 crore citing Covid exigencies. Since it was below the maximum discount that can be given in these cases the liquidator called for fresh bids putting Liberty and IMR head to head in an e-auction which resulted in a higher price,” said a person closely involved in the process.
Despite the lower realisation this is a closure of a legacy NPA for bankers of a plant that was defunct since November 2017. For Liberty this acquisition gives a foothold into the Southern market but only after investments in plant and machinery to get the company up and running. Liberty did not reply to an email seeking comment.
The UK-based Liberty Steel Group has total rolling capacity of 18 million tonnes across UK, US and India. The late revival in interest by both IMR and Liberty came due to the upturn in the Indian steel market on the back of higher global demand. Indian steel mills have hiked prices continuosly since September amid improved domestic demand in line with the 70% increase international prices since September, on the back of China revival.
SBQ Steels owned by the Chennai based RKKR Group, manufactures pig iron, sponge iron, steel billets, bars, and wire rods, catering to the requirements of automobile and engineering sectors, and also to the nuclear power industry. However, it has no direct iron ore linkage.
Located 15 km away from the Krishnapatnam Port in a 675 acre facility it gives Liberty the opportunity connect the plant with its facilities and iron ore from abroad.
The steel plant also has two power plants with 45MW capacity each.