Indian banks have asked the promoters of Essar Steel to bring in fresh equity worth Rs 2,500 crore into the company before it can go ahead with its proposal for loan restructuring.
Once the Ruia family — the promoters of the privately held company — brings in its equity contribution of around Rs 2,500 crore, banks would take up the proposal to convert a part of the company’s debt into equity.
The equity infusion by Essar would also include investment by a private equity firm which would pick up a stake in the steel company.
Essar Steel has about Rs 38,800 crore of gross debt and had applied for a loan recast last year after the Indian steel sector went into turmoil.
An Essar spokesperson said the company had submitted its proposal to banks and was awaiting their feedback. Essar Steel and a few other steel companies are seeking restructuring under the scheme for sustainable structuring of stressed assets, or S4A, from banks.
However, bankers were going slow on resolving loan recast proposals due to fear of prosecution by investigating agencies at a later date after IDBI Bank’s former chairman Yogesh Agarwal was arrested in January this year in the Kingfisher Airlines scam. Read More…