‘No certainty of recovery’ from underlying assets of Srei group to impact payment to creditors

BL Kolkata Bureau Updated - April 28, 2023 at 03:15 PM.

Kolkata, April 28 Raising questions over the evaluation matrix that gave National Asset Reconstruction Company (NARCL) a higher score in the bid submitted for the Srei group companies, a counsel appearing on behalf of debenture shareholders said that there is “no certainty of recovery” out of the underlying assets of the corporate debtor and hence the repayment to creditors could be impacted.

The counsel further argued that as per the final resolution plan submitted by NARCL, the security receipts to be issued to the creditors would be by way of redemption of secured non-convertible debentures and there is no guarantee whatsoever that it could be redeemed at the expected price.

The hearing will continue on Tuesday (May 2), said the division bench of Kolkata National Company Law Tribunal (NCLT) on Friday.

Resolution plan

According to the final resolution plan submitted by NARCL, the security receipts worth around ₹1,800 crore from the recovery of underlying assets of corporate debtor, which in this case is basically the loans given to borrowers, would be issued to creditors.

“So as creditors you have to patiently wait I (NARCL) will recover from them and then will pay you….there is no clue how many of these borrowers are surviving and have not themselves landed into CIRP,” the counsel said highlighting that there is uncertainty of recovery and hence repayment to creditors.

Following the completion of the challenge mechanism process, the Srei group entities had received three bids. The consolidated CoC for two insolvent Srei companies approved NARCL’s offer of ₹5,555 crore in NPV terms including upfront cash of ₹3,180 crore, with the highest voting (89.25 per cent) amongst the bidders. The resolution plan submitted by Authum Investment and Infrastructure (₹5,526 crore in NPV terms) received 84.86 per cent vote and that of the consortium of Varde Partners and Arena Investors (₹4680 crore in NPV terms) got 9 per cent vote.

It is to be noted that Authum Investment and Infrastructure, whose financial bid was adjudged the second-highest in terms of NPV, filed a petition before the Kolkata bench of NCLT, also challenging the process adopted by the CoC in which NARCL became the highest bidder on the basis of the evaluation matrix adopted. The matter will be come up for hearing on Tuesday.

Insolvency proceedings

The Kolkata bench of NCLT, had, on October 8, 2021, gave its approval to start insolvency proceedings against the two companies after the Reserve Bank of India filed insolvency applications against the two companies.

The RBI -appointed administrator has admitted claims of around ₹31,868 crore of the total claims received of around ₹34, 223 crore from financial creditors to Srei Equipment Finance Ltd (SEFL). He had also admitted claims to the tune of ₹257 crore from financial creditors to Srei Infrastructure Finance.

Published on April 28, 2023 09:45

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