Nuvoco Vistas Corporation Limited , a prominent player in the Indian cement industry, has made a significant move to strengthen its subsidiary, Vadraj Cement Limited. The company's Board of Directors has approved the conversion of a substantial unsecured loan into equity shares, marking a strategic financial restructuring within its corporate structure.

Key Details of the Transaction

The Board of Directors of Nuvoco Vistas approved the conversion of part of an unsecured loan, along with accrued interest, payable by Vadraj Cement to Nuvoco Vistas. The total amount being converted is ₹508.65 crore, which will be transformed into 50,86,54,794 equity shares of Vadraj Cement.

Terms of the Conversion

• Conversion Amount: ₹508,65,47,940 (Five Hundred and Eight Crores Sixty-Five Lakhs Forty-Seven Thousand Nine Hundred and Forty Rupees)
• Number of Shares: 50,86,54,794 equity shares
• Face Value: ₹10 per share
• Fair Value: ₹10 per share (based on a valuation report from a Registered Valuer)

Impact on Shareholding

This corporate action will not alter Nuvoco Vistas' ownership in Vadraj Cement. The company will continue to hold 100% of the paid-up equity share capital of Vadraj Cement, maintaining its status as a wholly-owned subsidiary. The newly issued shares will rank pari passu with the existing equity shares held by Nuvoco Vistas.

About Vadraj Cement Limited

Vadraj Cement, incorporated on February 26, 1996, is an unlisted public company engaged in cement manufacturing. Its facilities include:

• A 3.5 MMTPA (~10,000 TPD) clinker unit in Kutch, Gujarat
• A 6 MMTPA grinding unit in Surat, Gujarat

The company's operations had been suspended for over seven years before Nuvoco Vistas acquired it through a resolution plan approved by the National Company Law Tribunal, Mumbai Bench, under the Insolvency and Bankruptcy Code (IBC) framework.

Strategic Implications

This loan-to-equity conversion is a strategic move by Nuvoco Vistas to strengthen the financial position of Vadraj Cement. By converting debt into equity, the parent company is effectively reducing the debt burden on its subsidiary, which could potentially improve Vadraj's balance sheet and operational flexibility.

The transaction, classified as a related party transaction, has been executed at arm's length, with the share price determined based on a fair valuation by a Registered Valuer. This approach ensures transparency and fairness in the intercompany financial restructuring.

As the Indian cement industry continues to evolve, this move by Nuvoco Vistas demonstrates its commitment to optimizing its corporate structure and supporting its subsidiaries. The financial restructuring could potentially position Vadraj Cement for improved performance and contribute to the overall growth strategy of Nuvoco Vistas in the competitive cement market.

The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal challenging Nuvoco Vistas Corporation 's acquisition of Vadraj Cement, marking a significant development in the cement industry's landscape. The tribunal's decision upholds the Mumbai National Company Law Tribunal's (NCLT) earlier approval of Nuvoco's resolution plan for the debt-ridden cement company.

Key Points of the Acquisition

• Acquisition Value: Nuvoco Vistas' resolution plan involves an upfront payment of Rs 1,800.00 crore.
• Asset Details: Vadraj Cement operates a 3.50 MTPA clinker unit in Kutch and a 6.00 MMTPA grinding unit in Surat.
• Previous Ownership: The company was formerly owned by ABG Shipyard.
• Total Debt: Vadraj Cement's total debt exceeded Rs 8,000.00 crore.

NCLAT's Observations

The appellate tribunal noted several factors that influenced its decision:

• The bid value from Nuvoco Vistas exceeded the fair value of Rs 1,668.00 crore and the average liquidation value of Rs 1,080.00 crore.
• The Committee of Creditors (CoC) approved the resolution plan with a 100% majority.
• Employee claims totaled Rs 10.51 crore, with Rs 6.30 crore provided and the remaining amount to be paid on a pro-rata basis.

Employee Concerns Addressed

The appeal against the acquisition was primarily filed by Vadraj Cement employees, who had challenged the bid over concerns regarding gratuity dues payout. The NCLAT's dismissal of the appeal suggests that the tribunal found the resolution plan adequately addressed these concerns within the framework of the insolvency proceedings.

Acquisition Process

Nuvoco Vistas acquired Vadraj Cement through its subsidiary, Vanya Corporation. The insolvency process for Vadraj Cement began following a plea by Punjab National Bank.

Industry Implications

This acquisition strengthens Nuvoco Vistas' position in the cement industry, particularly in the western region of India. The successful resolution of Vadraj Cement's insolvency case also demonstrates the effectiveness of the Insolvency and Bankruptcy Code in facilitating corporate restructuring and debt resolution.

The NCLAT's decision to uphold the acquisition underscores the importance of balancing creditor interests with employee concerns in insolvency proceedings, while also ensuring the revival of stressed assets in the industrial sector.