Bhushan Steel: banks to appoint 3 directors, order forensic audit

Concerned over their ₹40,000-crore loan exposure in Bhushan Steel, a consortium of banks has decided to appoint three directors to the company’s board and conduct a forensic audit on its books of account. The banks also wanted the company to sell its non-core assets and bring in more equity. They will monitor cash flow on a daily basis.

The consortium includes State Bank of India and Punjab National Bank. More directors on the board means a higher degree of participation in the company’s decision making. A forensic audit will help verify if the borrowed money was used for the right purpose or diverted. The lenders took this stand after the Vice-Chairman and Managing Director of the company, Neeraj Singal, was arrested in an alleged bribery case involving Syndicate Bank Chairman and Managing Director SK Jain earlier this month.

The consortium met here on Monday to decide the future course of action after the Reserve Bank of India’s guidelines suggested a corrective action plan.

Strict control A statement issued by Punjab National Bank after the meeting said that the lenders had taken some decisions in order to keep strict control on the company. These include a forensic audit of the company by an audit firm, appointing concurrent auditors to monitor cash flow on a daily basis, appointing an independent engineer to monitor operations and project expansion, as well as appointing nominee directors.

According to the company’s Website, the board of Bhushan Steel comprises Brij Bhushan Singal as Chairman, Neeraj Singal as Promoter Director and three whole-time directors.

It also has four independent directors and a nominee director from LIC. The life insurer has a 3.52 per cent stake in the company, while banks and other financial institutions hold 0.01 per cent of its shares.

The lenders also advised the company to de-leverage its balance sheet by bringing in equity. However, the company requested for some time given the prevailing circumstances.

Since equity infusion will take time, lenders have advised the company to monetise non-core assets, which the company has agreed to. The company was also advised to come up with a definite timeframe for the exercise, the statement added.

Company’s stance At the meeting, the company made a presentation on the status of operational performance, organisational setup and details of key management personnel.

It was observed that there was an improvement in volume of production and in terms of value it was according to estimates.

The company said its professional management was still intact and its operations were running normally.

Bhushan Steel’s shares continued to plunge on the stock exchanges and hit the lower circuit. It closed at a new 52-week low of ₹152.50, down 5 per cent from the previous day’s close. The share price has lost over 61 per cent since August 1.