Lenders upset with Sanjeev Gupta for taking Liberty with top bids

“It’s been a colossal loss for lenders,” a senior banking executive, who was on the committee of creditors of two of these assets, said on condition of anonymity. “We want Liberty House to be blacklisted. In the case of Adhunik Metaliks, we will appropriate the Rs 55 crore that has been paid to us (by Liberty House). But we also want Liberty House to be penalised for the cost of delay in resolution and for how much the asset has deteriorated since their resolution plans were approved.”

More than a year after being declared the successful bidder, Liberty House has failed to pay the Rs 4,400 crore it offered to acquire Amtek. Gupta also reneged on the resolution amount for Adhunik Metaliks, where he offered Rs 600 crore against a combined loan default of Rs 5,000 crore by the metals group. In the case of ABG Shipyard, Liberty House was the sole bidder, offering Rs 5,200 crore (with Rs 400 crore upfront) against the Rs 18,245 crore that the shipbuilder owed banks.

All three cases are now heading towards liquidation. In March, Liberty House also withdrew its resolution plan for Amtek Ring Gears, a unit of Amtek Auto, long after being declared the winning bidder. The insolvency court imposed a cost of Rs 1 lakh on Liberty House for its casual approach to the resolution process, but allowed it to withdraw its bid.

“It’s still possible to revive Adhunik Metaliks,” the banker said. “We have received some interest from miners in Odisha who are keen on the steel plant, some private equity investors and a large auto component company. But it’s unlikely any of them will match Liberty House’s bid. The liquidation process in this case has been stayed for now. In the case of Amtek Auto, I don’t know if Deccan Value Investors (which had originally offered a competing bid of about Rs 3,150 crore) is still interested. We intend to follow through on the criminal charges against Liberty House and Sanjeev Gupta.”

In May, the Insolvency and Bankruptcy Board of India, the bankruptcy regulator, charged Liberty House and its senior executives with wilfully breaching the terms of the Amtek Auto resolution plan.

A year ago, when Mint had interviewed Gupta, the London-based entrepreneur said he wanted to make an investment commitment of as much as $10 billion to India. Liberty House is part of the Gupta Family Group Alliance, a closely held but loosely linked collection of the family’s various business interests in the UK, European Union and Australia.

In July, Liberty Steel completed a 740 million euro acquisition of seven major steelworks and five service centres across seven European countries from ArcelorMittal, after which it became one of the world’s top 10 steel producers outside China.

Gupta’s plan at the time, he said, was to manufacture ‘green steel’ in India from steel scrap that he could source from breaking old ships at the shipyard, and then send it down the value chain of steel-making at Adhunik and manufacture auto components at Amtek.

In response to questions over doubts about the credibility of his offers and his funding lines at the time, Gupta had said: “In my opinion, (we should be) welcomed with open arms rather than with questions. We’re not taking money from anybody but using our own money. Where are you coming from, where is the money from — why are there these questions?”

A spokesperson for Liberty House did not respond to emailed queries for this report.

“I believe Liberty House found it difficult to raise the funds needed to follow through on their resolution commitments,” said an investment banker, who advises several resolution applicants. “In India, most acquisition funding raised for stressed assets has been through local banks, which are comfortable lending to, say, JSW Steel (for Monnet Ispat) or Tata Steel (for Bhushan Steel). They are less comfortable lending to an outsider like Liberty House, whose foreign credit lines may not be accessible for India.”

“What a resolution plan can offer also depends on industry cycles,” said the investment banker. “With the massive slowdown in the automobile sector in India, auto component makers have been hit hard. It’s a bad time to put money into the business and easier to let the resolution plan lapse. Liberty House may have been keen on steel-making, but will be much less interested now in non-core assets, like the shipyard and Amtek Auto.”

Though IBC took off with much fanfare, three years on, it is struggling to close several of the original “dirty dozen” bad assets even as bankruptcy courts heave under the burden of too many cases being filed. “First, IBC is seeing endless delays. And now, there are cases such as these, which fail at the last mile,” the investment banker said. “The story of this financial year is that IBC is not the preferred option for banks if they want to resolve bad loans. They want to stay out of the legal system and take one-time settlements instead, either from existing promoters or new buyers.”