Large proportion of reported debt includes unpaid interest: Bhushan Steel

Below is the verbatim transcript of the interview.

Q: What was the original debt taken and why did the asset turned into distressed one?

A: The original debt was not so high and the plant started production in 2014. Unfortunately, by the time the plant started in financial year 2013-2014 there was a very big downturn in the industry and there was a dumping happening and all that. The steel industry was in the worst phase. Unfortunately, Bhushan Steel got caught in a wrong cycle. It was after 20 years the first Greenfield steel plant had come in India. Before that only JSW Steel and Essar Steel and Ispat which had come in early 90’s, so this was the first Greenfield plant which had come in the last 20 years and Bhushan Steel got caught in a wrong cycle by the time it got fully commissioned and all that.

There is a lot of interest overhang within this number and there is a lot of unpaid interest, so it is not that the money was borrowed for so much. There is a lot of unpaid interest in this.

Q: As per your records what is the last debt that you had taken note of and if out of that what is the unpaid interest part of that?

A: Based on earlier numbers which I have discussed with banks by us when we were in the restructuring stage we were not offline as far as the capex of the plant was concerned. It was not that the company had put in huge capex. I think the borrowed amount would not be more than between Rs 30,000 and 35,000 crore, the borrowed amount. The rest is all interest.

Q: Has there been any communication, any proposal that you have put forth to the bank if you could tell us what is going on there after that ordinance said that the promoters will be barred from bidding for their own assets?

A: The ordinance which came in early November, where there was a bar on the promoters to bid for the company and that really put all the promoters in to lot of a shock situation because this situation where the company is, I would not like to comment on the other sectors, but specially on the steel sector this was very well aware by the government and everybody concerned, all the stakeholders that the steel industry was not doing well for the last three to four years.

Al the steel companies except two which is Tata Steel and JSW Steel are in black and all the rest of the steel companies including Steel Authority of India (SAIL) have been in the red for last three to four years. It was a big shock for everybody that because of the circumstances the companies were in default. Lot of companies were going ahead with the restructuring because the banks had realised and the government also had realised that there was a sectoral problem in the steel sector.

Unfortunately, I think we came in a total different situation of the Insolvency and Bankruptcy Code (IBC), code which came in June by the Reserve bank of India (RBI) and all the large steel companies were put into that. At that time it was not envisaged that the promoters would be barred from bidding, but now it was. So, that stays like that.