National Asset Reconstruction Company (NARCL) has emerged as the highest bidder at the end of an intense challenge mechanism bidding process for the two insolvent Srei companies. The government-promoted bad bank’s bid of `5,555 crore was found to be highest in net present value (NPV) terms.
Authum Investment and Infrastructure’s bid of Rs 5,526 crore (in NPV terms) was adjudged the second-highest during the process, which concluded late on Tuesday.
A consortium of Varde Partners and Arena Investors, which has been in the fray from the beginning of the corporate insolvency resolution process (CIRP) for the two NBFCs, dropped out at the end of the second round of the five-round bidding on Tuesday. The consortium’s financial bid in terms of NPV stood at `4,687 crore.
Only NARCL and Authum were in the race to become the top bidder by the third round of the challenge mechanism process, adopted by the consolidated committee of creditors (CoC) for Srei Infrastructure Finance (SIFL) and Srei Equipment Finance (SEFL) for inviting fresh resolution plans from eligible prospective resolution applicants.
“Both NARCL and Authum Investment are leading at the end of the challenge mechanism process because there exists a very small gap between their financial bids. Though Varde-Arena consortium’s financial bid in NPV terms stands at the third position, its upfront cash component remains little higher than that of both NARCL and Authum. Now, all the three plans will be put to vote for the CoC’s approval,” a source with knowledge of the process told FE on Wednesday.
The CoC had decided to adopt the challenge mechanism process as in the revised plans submitted by the three bidders earlier, the upfront cash component remained below `3,000 crore. The creditors thus decided that `3,000 crore would be considered as the minimum threshold value of the financial proposals towards the upfront cash payment for the eligible resolution applicants for participating in the challenge process.
In the challenge mechanism process, there were two parameters — upfront cash component and NPV of committed deferred payments by way of different financial instruments offered by prospective resolution applicants (PRAs) in their submitted financial proposals.
NARCL’s offer of `5,555 crore in NPV terms includes upfront cash of `3,180 crore. Apart from non-convertible debentures (NCD), the bad bank has also offered to pay optionally convertible debentures (OCD) of around `6,000 crore, taking its gross plan to around `12,660 crore.
NARCL, a government entity, was incorporated in July 2021 with a majority stake held by public sector banks and balance by private banks with Canara Bank being the sponsor bank.
The total admitted claims of the financial creditors of the two NBFCs stood at `32,750.22 crore. State Bank of India, Punjab National Bank, Axis Bank, HDFC Bank, Union Bank of India, Canara Bank, IDBI Bank, UCO Bank and Indian Overseas Bank, among others, are the financial creditors of SIFL and SEFL.
According to the sources cited above, the CoC is likely to meet on January 9 to vote on all the three resolution plans. The plan which will get the highest vote will be treated as approved by the CoC. An email sent to the administrator, Rajneesh Sharma, was unanswered till the time of going to the press.
The final date for completion of the CIRP process is January 5. The CoC and the administrator have approached the Kolkata bench of the National Company Law Tribunal (NCLT), seeking an extension to complete the resolution process.
The insolvency proceedings against SIFL and its subsidiary SEFL commenced in October 2021 after insolvency petitions filed by the Reserve Bank of India (RBI) were approved by the Kolkata bench of the National Company Law Tribunal (NCLT).