A Mumbai bench of insolvency tribunal has expressed surprise over the similarity between the bid value offered by Twin Star Technologies Ltd, a promoter entity of Vedanta Resources group founded by Anil Agarwal, and the liquidation value of the target firm Videocon Industries.
In what is a 95.8% haircut to bankers, the resolution plan of Rs 2,962 crore proposed by Twin Star Technologies to acquire bankrupt conglomerate Videocon Industries was approved by the National Company Law Tribunal (NCLT) last week.
The plan was approved by the lenders led by State Bank of India in November last year with a majority vote share of 95.09% in the 19th Committee of Creditors (CoC) meeting.
The Vedanta Resources group firm will acquire 13 companies of the Videocon group which has presence in consumer electronics, home appliances, oil and gas, telecom services, digital solutions, real estate, and electronic retail chain, among other segments.
In the order now uploaded on its website, the NCLT has pointed out that while the fair value estimated by registered valuers stood at Rs 4,069 crore for the 13 companies, the liquidation value is Rs 2,568 crore.
“Surprisingly the resolution applicant also valued all the assets and liabilities of all the 13 companies and arrived at almost the same value,” NCLT said in the order dated 8 June.
The total admitted claims regarding the 13 group companies of Videocon Industries stood at Rs 64,938 crore. The resolution plan will mean a recovery of a meagre 4.15% for all creditors and 5.33% for financial creditors.
Videocon Industries was controlled by Venugopal Dhoot and his family before lenders dragged it to the NCLT in December 2017 and pushed it into the corporate insolvency resolution process (CIRP) in June 2018.
“As per regulations, the liquidation value and fair market value is kept as confidential and is told to the CoC members only at the time of finalising the resolution plan. Even in the present case the resolution bids were opened in the 15th CoC meeting held on 2 September, 2020 wherein liquidation value and fair market value were told to the members of CoC,” the NCLT order stated.
It further said that a “doubt arises upon the confidentiality clause being in real time use, therefore, we request IBBI (Insolvency and Bankruptcy Board of India) to examine this issue in depth so as to ensure the confidentiality clause is followed unscrupulously, without any compromise in letter and spirit by all the concerned parties and entities connected.”
The tribunal further directed that “IBBI can frame appropriate regulations, safeguards for the maximisation of value of the assets which will benefit all the stakeholders”.
Under the resolution plan, Twin Star Technologies has proposed an upfront cash payment of Rs 200 crore to financial creditors, non-convertible debentures (NCDs) of Rs 2,700 crore to financial creditors, with an interest of 6.65% per annum.
Workmen and employees will get approximately Rs 52 crore and operational creditors will get Rs 10 crore as upfront cash payment from the funds infused by the resolution applicant. The amount will be distributed proportionately between operational and statutory dues.
The NCLT has also requested both the CoC and Twin Star Technologies to consider increasing the payout to operational creditors, which are largely medium and small sized enterprises. “They may themselves be subject to insolvency proceedings in the future,” it said.
Post implementation of the plan, the assenting financial creditors will receive 8% of equity holding in the new entity, on a post money fully diluted basis, against their admitted debt.
As part of the implementation, shares of Videocon Industries and Value Industries will be delisted from the stock exchanges. Of the 13 Videocon Group companies, 11 firms will merge into Videocon Industries.
Besides Twin Star Technologies, V-Shape Investment Management Limited’s plan was shortlisted by the CoC.