Binani Cement tug of war: Here’s why CITI feels Dalmia Bharat is the likely winner

image The Binani group’s contention was that the UltraTech offer would allow the promoters to repay all dues and settle with lenders outside of the bankruptcy court process. (Image: PTI)

After the Supreme Court on Friday refused to allow out-of-court settlement for debt-ridden Binani Cement, global brokerage firm CITI said that Dalmia Bharat is the likely winner in the battle. Notably, Ultratech Cement has reportedly raised its offer by nearly Rs 700 crore, to Rs 7,990 crore, according to an Economic Times report.

The entire episode, which initially had six contenders including a joint bid by ace investor Rakesh Jhunjhunwala and Radhakishan Damani had seen a very interesting turn of events, when Aditya Birla-group’s Ultratech Cement had had made an offer of Rs 7,266 crore to better the winning Rs 6,700 crore bid by Dalmia-led group. Following this, Binani Industries (the parent of Binani Cement) sought the SC’s intervention to scrap the resolution process under Insolvency and Bankruptcy Code.

The Binani group’s contention was that the UltraTech offer would allow the promoters to repay all dues and settle with lenders outside of the bankruptcy court process. However, the setback came when the Supreme Court on Friday forced it to withdraw the petition and said the matter would be heard by the National Company Law Appellate Tribunal (NCLAT).

Earlier, the NCLT told the creditors and the company to consider an amicable out-of-court settlement, which raised questions on the transparency of the entire process. “There is a valid question that has been raised over the transparency of the bidding process and if the NCLT has to really be meaningful, it has to adopt a more transparent process,” research firm Angel Broking noted.

According to the firm, Dalmia Cement was of the view that if Ultratech really had the intent of quoting Rs 7,266 crore they should have quoted the same during the bidding process itself. With Supreme Court’s refusal to allow the out-of court settlement, the ball will be back on NCLT’s court.

According to CITI, the pace of price hikes could be slower in the overall industry. The firm has maintained a buy rating on the Damia Bharat shares with a target price of Rs 3,370 per share. Dalmia Bharat shares were trading at Rs 2,861. CITI’s target price on the shares implies an upside of 17% from the current market prices.

Earlier, when a committee of creditors of Binani Cement chose Bain-backed Dalmia Bharat consortium as the winner, Ultratech had alleged that the process for choosing the top bidder was not transparent and that the resolution professional had not followed industry best practices.

Source: Financial Express