* Bhushan Steel says to date there is no bad loan
* Meeting with lenders on Aug. 18 - finance director
* Banks supporting company so far - finance director (Adds details, context, quote from lender)
By Krishna N Das
NEW DELHI, Aug 12 (Reuters) - India’s Bhushan Steel Ltd , a debt-ridden company whose managing director was arrested last week in a bribery case, has so far been able to service its loans, its finance director told Reuters on Tuesday.
The Central Bureau of Investigation (CBI), India’s top crime-fighting agency, arrested Sudhir Kumar Jain, chairman of state-run lender Syndicate Bank Ltd this month over allegations he took bribes to grant loan extensions to Bhushan Steel.
Bhushan Steel said last Thursday that Managing Director Neeraj Singal had surrendered to the CBI to assist the investigation, which has shed light on the dubious lending that has weakened the balance sheets of India’s state banks.
Family-controlled Bhushan Steel, which has its main operations in the eastern state of Odisha, owes net debts of $5.86 billion - eight times its equity market value of $732 million. It denies any wrongdoing in the bribery case.
“As of date, there is no bad loan,” Finance Director Nittin Johari said. “We are in talks with the banks.”
Johari said he expected clarity after a meeting of lenders, including Punjab National Bank (PNB) and the State Bank of India (SBI), on Aug. 18.
“All depends upon the banks, what they decide, how they are going to support. Because everything is not on the company’s hands,” Johari said by phone. “They are supporting the company but let’s see. After the meeting everything is going to be clear.”
Shares in Bhushan Steel, founded in 1989 by Brij Bhushan Singal and run by son Neeraj since 2002, have lost more than half of their value since Jain’s arrest.
Separately, Bhushan Steel said on Tuesday it had posted a quarterly loss and that its board had approved the issue of securities to raise up to $1 billion.
The finance ministry estimates that India’s dominant state banks will need $40 billion in fresh capital by 2018 to meet international capital adequacy standards.
A committee appointed by the central bank in May called corruption in state banks a major “public policy concern”, and recommended the federal government cut its stake in these banks to below 50 percent.
Total bank exposure to Bhushan Steel is about 400 billion rupees ($6.5 billion), according to top Indian lender SBI, which has proposed to the lenders’ consortium that a management agency be appointed to oversee the company’s operations.
Johari said teams were in place to run the company along with founder chairman Brij Bhushan Singal.
About $386 million of its total debt matures this fiscal year ending March 31 and $460 million in the next fiscal year.
The company has been in the news for various accidents at its main 3 million-tonne-per-year steel plant in Odisha. At least 72 people have died in accidents since the commissioning of the plant in August 2006, according to a state regulator.
SBI Chairwoman Arundhati Bhattacharya has said, however, that the plant is in good order.
“At least all of our lenders, engineers and other experts on our panel who have visited have confirmed that the asset is a very good quality asset,” Bhattacharya said last week.
“It is currently running properly also. We don’t want therefore for it to run into any kind of trouble and create trouble for our exposure.” (1 US dollar = 61.1225 Indian rupee) (Additional reporting by Sumeet Chatterjee and Devidutta Tripathy in Mumbai and Jatindra Dash in Bhubaneswar; Editing by Douglas Busvine and David Clarke)