National Asset Reconstruction Company (NARCL) and Authum Investment and Infrastructure are leading the race to acquire two insolvent Srei companies as the challenge mechanism process, adopted by creditors, progressed late into Tuesday evening.
A consortium of Varde Partners and Arena Investors, which was in the fray from the beginning of the CIRP process for the two NBFCs, is learnt to have slipped to the third position as it dropped out in the initial rounds of the challenge mechanism for inviting fresh resolution plans from eligible prospective resolution applicants.
All the three bidders — NARCL, the consortium of Varde Partners and Arena Investors, and Authum Investment — participated in the challenge mechanism process which started earlier in the day.
“The consortium of Varde Partners and Arena Investors was out at the end of the second round of the challenge mechanism. In the third round, only two participants, NARCL and Authum, remained,” sources with knowledge of the process told FE.
The process was on till late evening as the consolidated committee of creditors (CoC) for the insolvent firms decided to adopt five rounds of bidding in the challenge process if necessary. A mail sent to the administrator, Rajneesh Sharma, was unanswered till the time of going to the press.
The CoC decided to adopt the challenge mechanism process for inviting fresh resolution plans from eligible prospective resolution applicants as in the revised plans submitted by the bidders earlier, the upfront cash component remained below Rs 3,000 crore.
The CoC, thus, decided that Rs 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. “Each financial proposal participating in the first round of the challenge process should at least meet the aforesaid (Rs 3,000 crore) threshold value. The utilisation of this amount will be in the manner set out for Upfront Cash Recovery under the RFRP (request for resolution plans),” according to a note issued by the CoC to the three bidders.
Also Read: Srei: Bidders submit revised resolution plans
Earlier, as required, all the three resolution applicants had submitted their revised resolution plans for acquiring the two Srei companies, Srei Infrastructure Finance (SIFL) and Srei Equipment Finance (SEFL). However, for all the three revised plans, the crucial upfront cash components had stood below Rs 3,000 crore. The financial bids had remained at around Rs 14,000 crore and Rs 13,600 crore, respectively, for the consortium of Varde Partners and Arena Investor, and NARCL. And, for Authum Investment and Infrastructure financial bid stood at over Rs 7,000 crore.
Creditors were expecting “significantly higher” upfront cash offers from prospective resolution applicants as the consolidated CoC adopted a challenge mechanism 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). The total admitted claims of the financial creditors of the two NBFCs are Rs 32,750.22 crore. State Bank of India, Punjab National Bank, Axis Bank, HDFC Bank, Union Bank of India, IDBI Bank, UCO Bank and Indian Overseas Bank, among others, are the financial creditors of SIFL and SEFL.