SBI steps into Usha Martin promoters' dispute in NCLT to recover dues

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State Bank of India (SBI) has gone aggressive in recovering its dues from the troubled steel-wire rope leader Usha Martin Ltd. After forcing chairman Prashant Jhawar to resign in April for not executing loan covenants, the bank has now forced itself in the case before the National Company Law Tribunal (NCLT) filed by the erstwhile chairman, who is protesting his ouster and subsequent attempt by the current management to infuse funds.

SBI is now a party to the legal case against the two promoter factions - Prashant Jhawar and Rajeev Jhawar - with an aim to recover its share in company's total dues of Rs 3,800 crore.

"State Bank of India has now intervened and they want to put their views forward (in the case before NCLT)," managing director Rajeev Jhawar said.

Erstwhile chairman Prashant Jhawar had approached NCLT to restrain managing director Rajeev Jhawar from infusing any fresh equity or take any fresh loans. Prashant also demanded maintaining status quo and his reinstatement as the chairman.

SBI, the leader of the consortium, would now be a party to the case to be heard again on November 7.

Usha Martin has appointed Royal Bank of Canada for exploring ways to cut debt burden.

"Our long-term debt is about Rs 3,300 crore while working capital would be another Rs 500 crore. We might be able to repay most of the long-term debt, if not all if we are able to sell our wire rope business," chief finance officer Rohit Nanda said.

"We are looking at all the options (for asset sale). Within the next few weeks, we would be having various proposals and then the Board would decide. Within next six to eight weeks, we might be able to get (firm) offers and also the roadmap on how to recover. The Board would then take the call," Rajeev Jhawar said.

The purpose of selling its wire rope business generating about Rs 1,200 crore or one-third of the revenues followed by disposal of some minor assets like real estate worth about Rs 100 crore is to achieve a sustainable level of debt and costs, Jhawar said after the company's annual general meeting on Thursday.

Prashant Jhawar was removed as chairman at the insistence of SBI, which wrote to the Board to remove Prashant as he was failing to execute some loan covenants, said director Jitender Balakrishnan, who chaired the meeting.

"There were certain covenants which needed to be met. The banks weren't happy about Mr Jhawar not being able to resolve some issues of covenants. State Bank of India asked for a special meeting of the Board of Directors to consider removal of the chairman. Considering the type of environment in terms of NPAs and banks taking steps towards promoters who are defaulters, it was decided that it would be in the interest of the company if we get the banks on the right side of us, and after much deliberation, the chairman was removed (in April)," Balakrishnan told the shareholders.

Interestingly, several key directors including chairman GN Bajpai and erstwhile chairman Prashant Jhawar and several independent directors couldn't attend the meeting.
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