The Kolkata bench of bankruptcy court today approved the resolution plan submitted by the government-owned National Asset Reconstruction Company Ltd for the twin Srei companies that the Kanoria family once owned.
This will be the first acquisition of NARCL after it was formed two years ago with the aim to acquire bad loans from Indian banks. NARCL, which gave the highest offer among the three bidders, will now seek approval from the Reserve Bank of India to acquire Srei Equipment Finance and Srei Infrastructure Finance.
The ARC offered Rs 5,555 crore on a net present value (NPV) basis for the assets, while Authum Investment offered Rs 5,526 crore. Arena-Varde team offered Rs 4,682 crore at an auction on January 3. However, the team improved its offer to Rs 4,832 crore a day later. All offers are on an NPV basis, which is arrived at by discounting future cash flows.
The administrator has admitted Rs 32,750 crore in claims from verified creditors. The offer by NARCL will equate to a recovery of 17% on an NPV basis.
The Kolkata bench has rejected a petition filed by the promoter under Section 12A, which has a provision to allow the promoter to submit a plan under the Insolvency and Bankruptcy Code. The bench also rejected a petition filed by Authum that had filed a petition questioning the process undertaken by the administrator of Srei on counting of votes. In February, 87% of verified creditors voted in favour of NARCL’s resolution plan, while 77% voted for Authum Investment and Infrastructure.
“With NCLT approval, NARCL will now own the Srei infrastructure and equipment finance businesses. The RBI and Competition Commission of India has formally approved NARCL as successful resolution applicant. Now the monitoring committee will take charge for an ultimate transition,” said Abizer Diwanji, partner EY who advised the administrator of Srei.
However, Akshat Khetan, founder of AU Corporate & Legal Advisory Services says, “Resolving NBFC through the Insolvency and Bankruptcy Code (IBC) can be a complex decision that depends on various factors, including the nature of the NBFC’s operations, the extent of financial distress, and the regulatory framework in place nevertheless IBC seemingly helps achieve quick & consolidated resolution and revival.