SBI looks to sell its Essar Steel exposure to ARCs, banks, overseas investors

State Bank of India (SBI) is looking to sell its exposure in Essar Steel to asset reconstruction companies (ARCs), banks and foreign institutional investors (FIIs), sources told CNBC-TV18.

It is a very important development because there is a very good offer on the table for lenders as far as the ArcelorMittal offer, which has been approved and the haircut involved in that deal is less than 25 percent.

Now we are seeing SBI – which is the largest member in the consortium - coming ahead and saying that they want to sell their exposure of over Rs 15,000 crore to banks, ARCs. The SBI offer clearly indicates that they are fed up with the delays that are happening at the National Company Law Tribunal (NCLT). They had even moved higher court in to show that the proceedings are fast-tracked and that is something we haven’t seen now. Just the maintainability of the Essar promoters offer will be judged by March 31 and only after that Arcelor’s hearing be started.

So they have put this exposure on the block at a reserve price of Rs 9,587 indicating a haircut of 38 percent that SBI is willing to take as opposed to the recovery with ArcelorMittal’s offer with Rs 11,303, which indicates a haircut of 26 percent, much lower than what they are offering at.

It remains to be seen whether Edelweiss or some of the other ARCs that already have exposure want to aggregate this further. Lenders are losing patience with the entire process of NCLT and the litigations that are involved with the IBC.