Bhushan Steel gains on becoming NPA

Bhushan Steel is currently the top gainer on the BSE with volumes surging almost 4 times. Intra day the stock rose 10% to Rs.44.40 and is now at Rs.43 levels. Its 52-week high is at R.75.90 and low at Rs.32.50.

The news on the street, from some newspaper reports is that several banks that have lent money to the company have classified the loans as bad loans or non-performing assets in Q4FY16. Just to know the context – Bhushan Steel is sitting on debt of more than Rs.40,000 crore.

The company though is reported to have not yet heard any official word from the banks of its loans being classified as NPAs. Once a company’s loan gets declared as bad, the way ahead usually is that it will come under the SDR scheme - strategic debt restructuring" (SDR) scheme where banks must hold 51% or more of the equity after the debt-for-share conversion. A JLF is to be formed but in the case of Bhushan, banks have been struggling with the account since August 2014 when they first formed a JLF to monitor the company after vice-chairman Neeraj Singhal was arrested by the Central Bureau of Investigation (CBI) in connection with a loan-against-bribe scandal. Nothing came off it till date.

And now the news is that Bhushan could come under the refinancing debt under 5/25 scheme –the 5:25 scheme allows banks to extend long-term loans of 20-25 years to match the cash flow of projects, while refinancing them every 5 or 7 years.