‘Resolution process cannot please everyone’

Thomas K Thomas

Suresh P Iyengar

We toe the IBC rules given on the particular day. We engage leading law firms to work for us independently rather than depending on the lenders’ counsel. There may be duplication of cost, but it will also solve the conflict of interest issue. We avoid assignments where we are not allowed to have our own counsel.

We have done our job and the transaction is closed. The winning bidder, Tata Steel, had its team ready to take over the company within hours after the process ended. Of course, L&T and the promoters’ litigation are in the court. The resolution process is such that it cannot please everyone. It is for NCLT to decide on approving the final resolution plan.

In any resolution process the upfront cash offered by the bidder gets higher weightage than someone spreading the repayment over a period. While banks recognise that they have to take a haircut in the entire process, they are more concerned on the quantum of cash on the table. This will maximise the value and minimise the haircut.

The entire process cannot be automated from scratch. The IBC is for revival of the company with maximisation of asset value. So each resolution plan may be different. The lenders can appraise the valid proposals technically and commercially. Then the bidding process can possibly be taken online to maximise the value — something very similar to spectrum auction. They need to evolve a hybrid model which combines both the offline and online processes for best price discovery.

Honestly, we get very little time to understand the company between bidding for an assignment and actually taking over an asset. In some cases it has been told to take over operations in 48 hours. As we speak we have submitted three proposals. It is not necessarily that all these will go to insolvency. Banks are using it as a sword to make the defaulters pay up.

At the end of the day, the IRP job needs to be appreciated, especially in large cases. Under the Code, the IRP is an individual and a rule says his job cannot be sub-contracted. He has to manage a multi-billion-dollar company. Earlier, the promoter had an organisational structure, using an army of people. When the company is admitted under IBC it is an institutional problem and it needs an institutional approach to find a solution. Though the IRP is an individual, he represents an institution and he is dependent on it to run the show. Can one man run a steel plant or other similar large multi-location plants? Banks appoint a registered IRP like ours knowing that he will be supported by the firm he represents. This is exactly in line with international practice.

Our guys are typically chartered accountants who had worked as finance professionals in a manufacturing company, but not necessarily technical experts. We hire outside agencies who are experts in their field. We had hired First Advantage, floated by CS Verma, former Chairman of SAIL, and a set of public sector steel executives to manage Bhushan Steel. Many such companies are being set up by knowledgeable people in the power, steel, cement and across the manufacturing sectors. We had a great turnaround in Bhushan Steel due to improved operations and the upswing in the steel commodity cycle.

There is huge pressure from the incumbent promoter and employees in the business. Employees are really concerned. At times we do not get full cooperation from them due to their allegiance to the promoter. However, employees also tend to be logical. We have had situations where we ensure payment of salaries, PF, pending dues, bonus etc and this wins over their trust. Additionally, with widespread bidding interest from leading companies and stressed asset funds, employees get the comfort that the company will go to good hands and their careers would be protected.

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