Bombay Coated and Special Steels Limited used promoter loan

Bombay Coated acquired promoter Vijaykumar Himatrai Gupta’s Bombay Steels business on a going-concern basis for Rs 8.761 crore. The February 1, 2021 valuation-backed settlement credited Rs 6.311 crore, or 72.0% on a calculated basis, to Gupta’s loan account as quasi-capital, while 24.5 lakh equity shares were allotted.

What did Bombay Coated acquire from its promoter?

Bombay Coated acquired the running business of M/s. Bombay Steels from Vijaykumar Himatrai Gupta, its promoter and the proprietorship’s owner, under a Business Transfer Agreement, or BTA. Bombay Coated was incorporated on December 26, 2019, and the transaction closed on February 1, 2021, transferring the promoter-operated business into the company.

The transferred Business Undertaking covered more than physical assets. The February 1, 2021 closing package included movable properties, book debts, advances, deposits, receivables, stock-in-trade, cash and bank balances, investments and liabilities, together with assumed contracts, employees, customer contracts, know-how, brands, intellectual property, intangible assets, books and records.

Bombay Coated describes the transaction as a going-concern and “as-is-where-is” transfer. A going-concern transfer means an operating undertaking, including its business relationships and liabilities, was conveyed rather than selected assets alone; the disclosed package also included technical information, information systems, drawings, sketches and blueprints held at closing.

The supplied disclosure contains two agreement dates. The detailed material-acquisition section identifies the BTA as dated January 29, 2021, whereas Bombay Coated’s milestones table refers to a January 21, 2021 agreement. The detailed section also supplies the Rs 8.761 crore consideration, the February 1, 2021 valuation report and the February 1, 2021 closing date; the date difference is not explained in the supplied pages.

How was the Rs 8.761 crore consideration settled?

Bombay Coated settled the Rs 8.761 crore consideration through an equity allotment and a credit to Vijaykumar Himatrai Gupta’s loan account. The company states that a registered valuer issued the valuation report on February 1, 2021, the same date given as the transaction’s closing date.

Bombay Coated allotted 24.5 lakh equity shares with a face value of Rs 10 each to Gupta, and credited the remaining Rs 6.311 crore to his loan account. The arithmetic difference between the total Rs 8.761 crore consideration and the loan-account credit is Rs 2.45 crore, matching the aggregate face value of the 24.5 lakh shares.

The table distinguishes the disclosed face value of the share allotment from the residual loan-account credit. Bombay Coated does not state a separate issue price or share premium in the BTA settlement description, so Rs 2.45 crore is the implied value of that component based on the total consideration less the disclosed residual amount.

Why did Bombay Coated use a promoter loan as quasi-capital?

Bombay Coated used a promoter loan because it credited Rs 6.311 crore of the acquisition consideration to Vijaykumar Himatrai Gupta’s loan account rather than settling the whole Rs 8.761 crore through shares. The company specifically describes that loan-account balance as “quasi capital in nature.”

The quasi-capital classification follows the transaction mechanism disclosed for the February 1, 2021 closing. Bombay Coated transferred Rs 2.45 crore of implied consideration through 24.5 lakh shares and left the Rs 6.311 crore residual in its promoter’s loan account, making the loan component 72.0% of total consideration on a calculated basis.

The supplied acquisition disclosure does not give a repayment schedule, interest rate, conversion right, waiver provision or subordination term for the Rs 6.311 crore balance. It also does not state whether any portion was later repaid, converted into equity or otherwise modified, so the disclosure establishes the original settlement treatment but not subsequent changes.

Bombay Coated separately states that it had no rescheduling or restructuring of borrowings from financial institutions or banks as of the Red Herring Prospectus date. That statement concerns lender borrowings, whereas the Rs 6.311 crore quasi-capital entry arose from the 2021 purchase consideration due to its promoter.

How did the transfer change Bombay Coated’s corporate structure?

Bombay Coated’s 2021 transfer placed the Bombay Steels operating business within a company incorporated in 2019. Bombay Coated later changed from a private limited company to a public limited company following a board resolution dated January 21, 2025 and a shareholder special resolution dated January 22, 2025; the Registrar of Companies issued a fresh certificate on February 14, 2025.

As of the Red Herring Prospectus date, Bombay Coated reported 23 shareholders and a six-member board comprising one Managing Director, two Whole-time Directors and three Independent Directors. Vijaykumar Himatrai Gupta was Chairman and Whole-time Director from December 26, 2019, while Nitin Vijaykumar Gupta was Managing Director from the same date.

Bombay Coated reported no holding company, subsidiary, joint venture or associate company as of the Red Herring Prospectus date. It also reported no material shareholder agreements, inter-se arrangements or special shareholder rights, including no right for a shareholder to nominate a director.

The company identifies the BTA as the only disclosed material acquisition or divestment in the 10 years before the Red Herring Prospectus, apart from which it reports no merger, amalgamation or revaluation of assets. That disclosure makes the promoter-business transfer the documented transaction through which Bombay Coated acquired the business undertaking described in the prospectus.

Conclusion

Bombay Coated’s disclosed operating-business acquisition was a related-party transfer from promoter Vijaykumar Himatrai Gupta’s Bombay Steels proprietorship. Of the Rs 8.761 crore consideration supported by the February 1, 2021 valuation report, Rs 6.311 crore was credited as quasi-capital to the promoter’s loan account, while the remaining implied Rs 2.45 crore aligned with the face value of the equity shares allotted.

The next matter to watch is any later disclosure on the Rs 6.311 crore promoter loan, because the supplied pages do not specify repayment, interest, conversion or subordination terms. Readers can also monitor whether Bombay Coated clarifies the BTA date, which appears as January 29, 2021 in the detailed acquisition section and January 21, 2021 in the milestones table.