Essar Steel output slides 15% after NCLT referral: Sources

"Gas prices have risen to USD 10.16 per mmbtu in November from USD 7.4 per mmbtu in June this year," the sources said, adding that 68 per cent of Essar Steel's iron making is through the gas-based route and hence, gas price plays a critical role in the profitability of the company.

According to the sources, Ebidta fell to Rs 475 crore in the second quarter, from Rs 750 crore in the first quarter of 2017-18.

Essar Steel had been paying an average of Rs 250 crore every month to lenders towards loan servicing. In the last fiscal alone, it has paid close to Rs 3,500 crore, the sources said.

Ever since the resolution professional (RP) took over the reins of the company, these monthly payments to lenders have stopped, which has affected the banks' recoveries. The lenders have turned down the RP's request for additional debt of Rs 1,000 crore to manage daily operations, the sources said.

Essar Steel had approached the lenders to restructure its debt in 2016. In January 2017, the company had agreed to the terms of restructuring that were proposed by the lenders. Despite this, the restructuring could not be implemented. This was followed by the RBI directive in June 2017 that referred 12 companies, including Essar Steel, to the NCLT, the sources added.

At the time of appointment of the resolution professional in July 2017, the lenders had insisted that there should be no impact on the company's performance. The remit was to improve performance of the company as a 'going concern' and preserve its value, the sources said.

The lenders led by SBI in June had decided to launch insolvency proceedings against Bhushan Steel, Essar Steel and Electrosteel Steels by referring them to the NCLT under the Insolvency and Bankruptcy Code (IBC).