* To name auditor for forensic audit, monitoring cash flow
* To name three directors on Bhushan board
* Bhushan told to bring in equity, sell non-core assets
By Devidutta Tripathy
MUMBAI, Aug 18 The creditors of India's Bhushan
Steel Ltd will take steps including an audit to ensure
the steelmaker, whose managing director is implicated in a
bribery case, will be able to pay around $6 billion it owes.
The creditors, which include the country's biggest bank
State Bank of India, will also appoint three directors
to Bhushan Steel's board, Punjab National Bank, which
leads a group of lenders, said in a statement.
The Central Bureau of Investigation (CBI), India's top crime
fighting agency, this month detained Bhushan Steel's managing
director over allegations of offering to bribe a senior
executive at the Syndicate Bank Ltd in exchange for
loans. Syndicate Bank Chairman Sudhir Kumar Jain has also been
Family-run Bhushan Steel has denied any wrongdoing and said
it has so far been able to service loans.
Lenders found Bhushan Steel's operations "satisfactory",
according to the statement. However, as a "corrective action
plan" the banks would appoint a top auditor to conduct a
"forensic audit" of Bhushan, and another to monitor its cash
flow on a daily basis.
The lenders will also appoint an engineering firm to monitor
the operations of Bhushan and projects under expansion.
Nittin Johari, finance chief of Bhushan Steel, did not
immediately respond to calls seeking comment.
While two years of less than 5 percent economic growth has
led to a surge in bad loans, part of the bad debt has also been
blamed on poor scrutiny. Bad loans in Indian banks have surged
to 4 percent of the total as of March, from just above 2 percent
as of March 2012, according to central bank data.
A central-bank appointed committee in May called corruption
in state banks a major public policy concern. The committee has
recommended the government cut its stake in these banks to below
Bhushan Steel shares fell 5 percent, their maximum daily
limit, on Monday. Since the bribery allegations came to light in
early August, the stock has lost more than 60 percent of its
value, making it the worst-performing metals and mining stock
globally, according to data compiled by Thomson Reuters.
The lenders also asked Bhushan to cut debt by bringing in
equity and sell some non-core assets, although that would not be
immediate. Bhushan's board last week approved selling shares to
raise up to $1 billion but has not set a timeline.
Bhushan Steel last week posted a $23 million loss for the
three months to June that was its third straight quarterly loss.
Its net profit plunged to $10 million in the year to March 2014
from $171 million two years ago, while net debt jumped to $5.86
billion from $3.49 billion, according to a company presentation.
The company's net debt was nearly 13 times its operating
profit for the year ended March, compared with nearly 7 times
two years earlier.
($1 = 60.7650 Indian rupees)
(Additional reporting by Tripti Kalro and Krishna Das; Editing
by Miral Fahmy and William Hardy)