The Association of Asset Reconstruction Companies in India (AARCI) has raised concerns over invitation of Expressions of Interest (EoIs) issued for the sale of Vidarbha Industries Power (VIPL) through the Swiss Challenge Process. The EoIs were issued by SBI Capital Market, the advisor to VIPL, earlier this month.
VIPL is a subsidiary of Reliance Power, a former Anil Ambani group company, which owns two facilities of 300 MW capacity each in Butibori, Nagpur.
“We observe that the invitation contains one-sided clauses and unreasonable disclaimers, which not only imposes undue burden and obligations on participations but is also contrary to the industry norms and practices,” AARCI said in a letter dated July 24, addressed to SBI Capital Market.
The association said a disclaimer that the lenders have not verified any information or documents and would not be responsible would totally negate the reliability of due diligence process. Further, it also raised flags in the clause that prospective bidders would is deemed to have full knowledge of the debt of company, relevant documents and information.
“The data, which is not accepted and verified or certified by the seller, the bidder is seemed to have full knowledge. This is totally unwarranted and unprofessional and against the basic transaction structures and ethics,” it said.
AARCI, which also raised pointed out to a number of inconsistencies regarding data and confidential clauses, wanted the EoIs to be “suitably modified” to make the process a “balanced and fair” one. The association believes that these clauses not only place undue burden and obligations on potential bidders and participants but are also in direct contradiction to industry norms and practices.
On Tuesday, SBI Caps shortlisted three Asset Reconstruction Companies (ARCs) – Aditya Birla ARC, Reliance ARC and Asset Reconstruction Company India (ARCIL) to place bids through the Swiss Challenge process. The application by Rare Asset Reconstruction was rejected.
The three ARCs will now start the due diligence process, for which they will get three weeks’ time, before making a financial bid for VIPL. Post the due diligence, the bidders will be given one week for the queries and discussion, and another week to complete the Swiss Challenge process.
The lenders of VIPL had earlier declared Ahmedabad-based CFM ARC’s Rs 1,220-crore unsolicited bid as the anchor bid. This means that the company does not have to take part in the Swiss Challenge. National Asset Reconstruction Company (NARCL) had also submitted suo moto bid earlier, but later withdrew from the process.