The Indian government on Thursday, October 27, took an “on principle” decision that cash-rich government-owned companies, including Steel Authority of India Limited (SAIL), should take over steel companies with stressed balance sheets, a senior government official said on Friday.
The official said that at a high level meeting on Thursday, comprising the finance minister and officials from the ministries of steel, shipping and power, that the government-owned companies will seek to take over companies in their respective areas of operation which have been declared as non-performing assets by lenders and commercial banks.
For example, SAIL will be empowered to take over management control of ailing steel companies, the government official said.
The official said that commercial banks have declared several steel companies as non-performing assets on their books and converted part of the debt extended to these companies to equity. Some of the companies where the banks had invoked Strategic Debt Restructuring (SDR), converting part of their debt to equity, included VISA Steel, Monnet Ispat and Electro Steel Limited.
However, the final choice of companies for taking management control will be done in consultations between management of government-owned companies, the steel ministry and banks, the official said.
Significantly, at the same time, the government on Thursday also gave formal approval for SAIL’s divestment of its loss-making subsidiaries like Salem Steel Plant, Alloy Steel Plant and Visvesvaraya Iron and Steel Limited. SAIL will have the option of a complete exit from these subsidiaries or of looking for strategic investors who would buy majority equity in these companies, the official said.