After 863-day wait, SBI set to recover this much as ArcelorMittal pays up for Essar Steel; what’s next for IBC

After a long wait of 863 days, banks including SBI, IDBI Bank, Canara Bank, PNB among others have recovered a whopping Rs 42,000 crore, after ArcelorMittal made the promised repayment following resolution of Essar Steel under IBC. The creditors of Essar Steel have started receiving their dues from ArcelorMittal, and the entire process of transferring the full amount of Rs 42,000 crore to the lenders will be completed by Monday, the Financial Express reported citing sources. The development comes after the Supreme Court’s landmark judgement in Essar Steel case. The banks will get back Rs 42,000 crore of NPAs in a single stroke — the money which otherwise was lost in all probability. Once the transfer of funds is complete, these banks will be able to write-back their provisions, as most of the lenders had provided 100% against Essar Steel, following its insolvency. SBI alone is set to recover about Rs 12,161 crore. Banks and financial institutions including SBI, Canara Bank, PNB, ICICI Bank and Edelweiss ARC are set to recover about Rs 22,026 crore. 

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The success of Essar Steel case comes as a big boost to the Narendra Modi-led government’s Insolvency and Bankruptcy Code enacted to fight the NPA menace. Notably, Essar Steel was one of the largest accounts among RBI’s 12 big accounts identified for an immediate resolution. Essar Steel’s case is unique as it was auctioned under the new Insolvency and Bankruptcy Code to recover Rs 54,547 crore of unpaid dues. Interestingly, this is also the largest recovery under the IBC in percentage terms. 

In the last two years, banks have managed to resolve seven of those cases and recover Rs 1.13 lakh crore. The total admitted claim in the seven cases was Rs 2.13 lakh crore. Bhushan Steel, Essar Steel, Jaypee Infratech, Lanco Infratech, Monnet Ispat & Energy, Jyoti Structures, Electrosteel Steels, Amtek Auto, Era Infra Engineering, Alok Industries Ltd and ABG Shipyard were the 12 large accounts referred to by RBI under the IBC. These accounts together had total outstanding loan of Rs 1.75 lakh crore. In the previous fiscal year (FY19), the recovery under the IBC had been Rs 70,000 crore, twice than the figure recovered through the debt recovery tribunal, Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, and Lok Adalat in 2017-18, according to a CRISIL report.

Last week, the Supreme Court on Friday cleared the path for distribution of proceeds from the Rs. 4,350-crore bid submitted by Baba Ramdev-led Patanjali Ayurveda for takeover of Mumbai-based edible oil maker Ruchi Soya. Patanjali Ayurveda, which had emerged as the successful bidder, will be paying Rs 4,134 crore to the financial creditors including Singapore’s DBS Bank, the dissenting financial creditor, as against admitted claims of Rs 8,398 crore.