This case explains the need for rational takeover decision in India during a time when assets of a lot of distressed companies are offered for sale
This case explains the need for rational takeover decision in India during a time when assets of a lot of distressed companies are offered for sale. Many Indian companies have undertaken ambitious expansion activity during 2010-17 availing huge loans from banks. For various reasons namely faulty planning, overzealous expansion, challenging external environment and syphoning out the fund, many of them failed to operate profitably. They could not pay the interest and repay principal to the banks thereby jeopardising the banking operation in the country. Reserve Bank of India, the central bank of India armed with a stringent Insolvency and Bankruptcy Code 2016 advised the lender banks to initiate proceedings against the 40 big defaulter companies of the country. After six months resolution period of the companies was over, lenders banks initiated auction of few default companies. When the process of bidding started, bigger and more stable players in the same sector saw it as an opportunity to expand their business by buying the companies which were operational. This case is inspired by such a takeover in Indian steel sector. A professor of finance examines the takeover through the lenses of rationality. The case draws facts and figures from the news and analysis of the Indian steel sector & companies involved in the acquisition process.