UltraTech to challenge Binani sale to Dalmia-led consortium
19 Mar 2018
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Aditya Birla Group company UltraTech Cement Ltd has challenged the sale of Binani Cement Ltd to rival Dalmia Bharat Ltd, alleging lack of transparency in the bidding process, after it lost a bid to acquire the ailing cement maker.
UltraTech, India’s largest cement maker, has alleged that the bankruptcy resolution process at Binani Cement “was shrouded in secrecy” as the panel of lenders to Binani voted for a bid by a Dalmia Bharat-led consortium.“The creditors of Binani Cement have overlooked important aspects of the resolution plan submitted by us and have hastily decided to approve the sale to Dalmia for reasons best known to them,” Atul Daga, chief financial officer at UltraTech Cement, said in media interviews.
Daga alleged that the process was not transparent, with bidders not being allowed to participate in the meetings.
“We fail to understand the reasons behind approving the sale to Dalmia, although we had made the highest bid,” Daga said. “Isn’t the committee of creditors responsible for looking after the interests of all stakeholders?
“The Aditya Birla Group will not take this lying down.”
UltraTech has challenged the sale to Dalmia Bharat at the National Company Law Tribunal, and the matter is scheduled to be heard today by the Kolkata bench of the NCLT. The resolution professional has been asked to appear in person for the hearing.
On 16 March, a committee of Binani Cement creditors approved the resolution plan from a consortium led by Dalmia Bharat Ltd. The Dalmia Bharat consortium had bid about Rs6,350 crore ($978 million) and had offered close to a 20 per cent stake in Binani Cement to its lenders.
Dalmia Bharat proposed to make the Binani Cement investment through an equal joint venture with India Resurgence Fund, which is backed by Bain Capital Credit and Piramal Enterprises Ltd.
In fact both UltraTech and Dalmia had submitted bids of roughly around Rs6,000 crore each, with included upfront cash payments, as well as an offer of close to 20% stake in Binani to lenders.
Although Dalmia Bharat’s bid was marginally higher, UltraTech had raised the offer by Rs700 crore, taking its overall offer above Rs7,000 crore (See: UltraTech sweetens Binani bid, alleges undue preference for Dalmia-Bain).
UltraTech was specifically asked by the creditors to provide information on a Competition Commission of India (CCI) penalty, which is a contingent liability on the company.
In 2016, CCI had imposed a penalty of Rs1,175.49 crore on UltraTech. This was part of an overall penalty of Rs6,700 crore on 11 cement companies, including UltraTech, ACC, Ambuja Cements Ltd, Ramco Cements Ltd and JK Cement Ltd, as well as industry body Cement Manufacturers Association for cartelisation (See: CCI fines 11 cement firms, trade body Rs6,700 cr for cartelisation).
“We were told that our bid was not being considered because of the contingent liability following the CCI order,” said Daga.
“Even before we revised the bid higher, the difference in score between us was marginal, but lost out as creditors unilaterally decided that we will not get the Competition Commission of India approval for the deal.”
Daga also alleged that the job of evaluating the bidders on the parameter of a potential position of monopoly was done wrongly by turnaround management firm Alvarez & Marsal.
“Unless you are a CCI expert, I don’t think any agency can do evaluations for CCI matters,” said Daga.
In July last year, NCLT’s Kolkata bench had admitted the insolvency petition against Binani Cement. Bank of Baroda (BoB) had referred the company to NCLT after it failed to repay around Rs100 crore, following which Vijaykumar V Iyer of Deloitte India was appointed as the interim resolution professional (IRP).
At the time of being admitted in NCLT, Binani Cement owed a consortium of lenders close to Rs3,042.93 crore.
