The Kolkata bench of the National Company Law Tribunal (NCLT) on Friday approved the resolution plan of state-backed National Asset Reconstruction Company (NARCL) for two insolvent Srei companies under the corporate insolvency resolution process (CIRP).
It will be the first acquisition by the government-owned ARC.
The consolidated committee of creditors (CoC) for the two companies – Srei Infrastructure Finance (SIFL) and Srei Equipment Finance (SEFL) – in February had approved the resolution plan of NARCL with the highest voting among bidders.
“National Company Law Tribunal, Kolkata has orally pronounced an order today approving the resolution plan submitted by National Asset Reconstruction Company with respect to the corporate insolvency resolution process of the companies under Section 31 of the IBC,” Srei Infrastructure Finance said in a stock exchange filing.
Notably, the resolution plan of the government-owned ARC was approved with a 89.2% voting share of the consolidated CoC for Srei Infrastructure Finance (SIFL) and Srei Equipment Finance (SEFL). While the resolution plan submitted by Authum Investment and Infrastructure received 84.86% vote, that of the consortium of Varde Partners and Arena Investors got 9% vote.
Three bidders — NARCL, the consortium of Varde Partners and Arena Investors, and Authum Investment – had participated in the challenge mechanism process, adopted by the CoC, to acquire the two NBFCs under the CIRP.
The administrator of the insolvent companies, Rajneesh Sharma, received the Reserve Bank of India’s ‘fit and proper’ approval for NARCL on March 23.
After the challenge mechanism process ended, NARCL’s offer of Rs 5,555 crore in net present value (NPV) terms, which includes an upfront cash of Rs 3,180 crore, was found to be the highest. The bad bank’s gross offer stands at over Rs 14,000 crore, including cash and a committed amount of more than Rs 6,500 crore. The gross offer includes optionally convertible debentures (OCD) of around Rs 8,000 crore, and it would be redeemed on recovery. Putting together all the components, financial creditors would be able to recover over 40% of the amount admitted as claims.
Authum Investment and Infrastructure’s bid of Rs 5,526 crore, in NPV terms, was adjudged the second-highest. The resolution plan submitted by the consortium of Varde Partners and Arena Investors consisted of a financial bid of around Rs 4,680 crore in terms of NPV, including Rs 3,250 crore of upfront cash.
The insolvency proceedings against SIFL and SEFL commenced in October 2021 after the insolvency petitions filed by the Reserve Bank of India were approved by the Kolkata bench of the NCLT.
The total admitted claims of financial creditors are Rs 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 to the firms.
The NCLT Kolkata bench rejected the appeal filed by the Kanorias, the erstwhile promoters of two Srei companies, requesting to consider their proposal to withdraw the companies from the CIRP under Section 12A of the IBC after making a fresh settlement offer.
According to that offer, creditors’ entire claim of around Rs 32,000 crore would be repaid using multiple financial instruments such as upfront cash, NCDs, OCDs and equity over time. Kanorias claimed that their fresh settlement offer was the ‘highest’ among the existing ones.
The administrator, however, returned the resolution plan, submitted by the erstwhile promoters, stating that he was not the “competent authority” to accept the plan under Section 12A of the Insolvency and Bankruptcy Code.