Alok Industries’ lenders reject Reliance Industries-JM Financial bid

The 270-day deadline for the resolution process set by the Insolvency and Bankruptcy Code has ended for Alok Industries. In fact, it ended on Saturday. But yesterday evening, in a regulatory filing, Reliance Industries Ltd (RIL) said that its joint bid with JM Financial Asset Reconstruction Company Ltd did not meet with the approval of the Committee of Creditors (CoC) to Alok Industries.

Two senior officials in the know told The Economic Times, only 70 per cent of the lenders endorsed the revised all-cash offer of Rs 5,050 crore, which was not much higher than their previous offer.

To remind you, the Ahmedabad bench of the National Company Law Tribunal (NCLT) had admitted insolvency proceedings against Alok Industries in July 2017. It was among the 12 companies on RBI’s first list. The consortium of lenders, led by SBI, is claiming dues of over Rs 23,000 crore from the beleaguered textile company.

RIL-JM Financial ARC was the sole bidder and its initial offer of Rs 4,950 crore on April 12 had reportedly been rejected by 30 per cent of the CoC on the grounds that it was too low. Under the IBC, a resolution plan needs approval from at least 75 per cent of the lenders to be eligible for the next stage, which is the NCLT’s approval. The daily added that within 24 hours, Reliance-JM Financial ARC then made a revised offer. “In the second round, again 30% rejected it, implying that those who had rejected it earlier were not happy with the revised offer that increased the bid by just about Rs 100 crore,” said a source. A major strike against the bid was the fact that it was marginally above the liquidation value, set at Rs 4,200 crore, so even the revised offer may have reportedly spelt a haircut of 83 per cent for the lenders.

So what’s going to happen to Alok Industries now?

According to the bankruptcy law, if cases aren’t resolved within 270 days, a company’s assets will be liquidated, and as per the report, that’s exactly what the resolution professional is likely to now propose. What happens next will also set the benchmark for the fledgling IBC. If the NCLT goes soft and allows a further extension, other pending and future cases will also expect similar leniency, which does not bode well for its whole speedy redressal promise.

According to BloombergQuint, Alok Industries is not the only one to have run out of time; the 270-day deadline is also over for Monnet Ispat & Energy Ltd. and Jyoti Structures Ltd. The CoC for Monnet Ispat has approved a joint resolution plan submitted by JSW Group and AION Capital. In case of Jyoti Structures, lenders approved a plan submitted by a consortium of 50 investors after the deadline ended. Resolution professional for Jyoti Structures, Vandana Garg, has approached the NCLT for the extension to be approved. The report adds that five of the first 12 companies dragged to NCLT are in the last lap of insolvency proceedings, as lenders have approved resolution plans, but the Tribunal has yet to put its seal of approval on them.

The recovery statistics under the IBC also leave much to be desired. Earlier this month, Corporate Affairs Secretary Injeti Srinivas revealed that less than half of the staggering Rs 9 lakh crore worth of non-performing assets (NPAs) accumulated by banks have returned due to the new framework set in place in 2016.

Meanwhile, the bad loan problem continues to snowball in the sector. In a written answer to the Rajya Sabha in end-March, Minister of State for Finance Shiv Pratap Shukla had admitted that the 21 public sector banks (PSBs) had collectively written-off over Rs 1,154 crore in NPAs in the last fiscal till December 31. As per the PSB data that he submitted, that’s a 103 per cent jump from the amount written off in 2016-17 and a scary 519 per cent higher than 2015-16.businesstoday