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MUMBAI: UltraTech Cement made a revised bid of Rs. 7,840 crore for Binani Cement following an order by the bankruptcy court that its lenders should consider the offer even though it had lost out to the Dalmia Bharat team, people aware of the development said.
The company said on Sunday it submitted a fresh offer for debtladen Binani to meet the National Company Law Tribunal’s May 5 deadline. UltraTech declined to comment on the bid amount.
The lenders are expected to meet on Monday to discuss Ultra-Tech’s new bid. If they accept UltraTech’s offer, it would be the first such deal to ensure that not only all secured, unsecured and operational creditors are fully paid, but also the Braj Binani family, the main equity holders.
Dalmia Bharat, which had originally been declared the highest bidder, has been allowed to revise its offer for the stressed cement maker in response to UltraTech’s fresh bid. However, it is unlikely to do so, calling the latest exercise “an illegal process,” people close to the company said.
Dalmia Bharat has filed a plea in the National Company Law Appellate Tribunal seeking a stay on NCLT order directing Binani Cement’s lenders to consider a revised bid from UltraTech. While the NCLAT rejected the plea for a stay, it admitted the petition. The next hearing is scheduled on May 22, after which Dalmia Bharat will decide its course of action.
UltraTech, an Aditya Birla Group company, and Dalmia Bharat had both bid for Binani Cement in February. Although UltraTech first offered Rs. 6,500 crore, a little lower than Dalmia Bharat’s Rs. 6,700 crore, it later increased it by Rs. 7,000 crore. By then, the lenders had already declared Dalmia Bharat as the top bidder.
UltraTech then went outside the insolvency resolution process and made an offer to buy the company, a proposal that was rejected by the Supreme Court.
Dalmia Bharat has not yet been approached by the resolution professional after UltraTech submitted the revised bid.
Dalmia Bharat was “surprised” by the NCLT order and “will take all steps required,” the company said in a statement. The company has the option of approaching the SC, conditional on the ruling passed by the appellate tribunal. The ability of Dalmia Bharat to match UltraTech’s bid depends on two aspects – its private equity partner and taking on additional debt to support funding.
Dalmia Bharat bid for Binani Cement in a consortium with Bain Piramal Resurgence Fund, which will help with its expertise of buying and turning around distressed assets. Private equity funds work on a model where they can create value from a distressed asset and exit in a fixed span, usually about five years.
According to a cement analyst, in an attempt to match the aggressive bid, the PE fund will have to take a hit of 20-25% on its internal rate of return on the asset or will have to extend its involvement with the asset by a few years.