The consolidated committee of creditors (CoC) for two insolvent Srei companies has approved the resolution plan of state-backed National Asset Reconstruction Company (NARCL) with the highest voting among the bidders.
The resolution plan of the government-owned ARC was approved with a 89.25% 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, sources close to the development told FE.
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 corporate insolvency resolution process.
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 under the approved resolution plan stands at over Rs 14,000 crore, including cash and 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 around 45% 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 upfront cash amount.
“The approved resolution plan of NARCL will be sent to the Reserve Bank of India today (Wednesday) for the ‘Fit and Proper’ criteria. Then, an LoI (letter of issuance) will be issued to NARCL. It will also be asked to submit performance bank guarantee. An application with the approved resolution plan of NARCL will be submitted to the Kolkata bench of the NCLT by February 18 for its approval,” said the sources cited above.
Persons familiar of the matter told FE that as per its resolution plan, NARCL has proposed to run Srei Infrastructure Finance (SIFL) as a “going concern” NBFC. The equipment finance business would be managed under SIFL, a listed entity. “Srei Equipment Finance (SEFL) would act as a run-down platform. This entity would be used for recovery process from the portfolio. As per the plan, NARCL would pass on the recovery amounts from the portfolio to the CoC,” the persons said.
Currently SEFL is SIFL’s subsidiary. According to NARCL’s plan, it would run SIFL on its own at present. Later, the ARC would look for forging partnerships with some experienced NBFCs for SIFL.
An e-mail sent to NARCL remained unanswered till going to press. Rajneesh Sharma, the administrator, was not available for a comment.
The insolvency proceedings against SIFL and SEFL commenced in October 2021 after insolvency petitions filed by the Reserve Bank of India had been 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, Canara Bank, IDBI Bank, UCO Bank and Indian Overseas Bank, among others, are the financial creditors of the two firms.
Meanwhile, the Kanorias, the erstwhile promoters of two Srei companies, have filed an appeal with the NCLT, requesting the CoC to consider their proposal to withdraw the companies from the ongoing corporate insolvency resolution process under Section 12A of the IBC, according to sources close to the Kanorias.
“We have filed our plea with NCLT, the adjudicating authority, today (Wednesday) so that Srei CoC can consider our plan that offers highest resolution plan among all bidders, both in value and merit. We hope that they consider this in the best interest of the public,” sources said.
The erstwhile promoters last week put forward a proposal to withdraw the companies from the ongoing CIRP after making a fresh settlement offer to the creditors. The proposal to withdraw SIFL and SEFL from insolvency proceeding under Section 12A of the IBC was made through SIFL promoter company Adisri Commercial. As per the resolution 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 to the creditors was the “highest” among existing bid offers.
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.