National Asset Reconstruction Company (NARCL) has emerged as the highest bidder under the ‘challenge mechanism’ for the resolution proceedings of two Srei Group companies — Srei Infrastructure Finance and Srei Equipment Finance, which began on Tuesday.
After the five-round exercise, undertaken to increase the upside in cash proportion and committed amounts as per the net present value (NPV) and tenure of the resolution plans, NARCL submitted the plan with the highest net present value of ₹5,555 crore.
This was a significant increase from the initial bid submitted on December 2, wherein the cash and NPV component was equivalent to around ₹3,200 crore. NARCL has now increased the cash component to ₹3,250 crore from ₹2,100 crore earlier, sources told businessline.
The other two participants, Authum Investment and Infrastructure submitted a plan with a NPV of ₹5,527 crore and the consortium of Varde Partners and and Arena submitted for ₹4,867 crore.
Bids under review
The technical bids were submitted on December 28, sources said, adding that now the CoC (committee of creditors) will review the technical bids as well as the proposals submitted under the Challenge mechanism.
The CoC and legal teams will complete the due diligence and technical negotiations by the time of the next meeting on January 9, following which the CoC will hold final discussions and put the approved plans for voting, sources said, adding that the voting period will be for 21 days.
All the resolution plans include a combination of upfront cash payments and deferred payments through instruments such as debentures, with a timeline of 3-7 years to clear the twin Srei companies’ dues.
The participating entities had submitted financial bids of ₹13,600-14,000 crore for the Srei companies, however the cash component was below ₹3,000 crore. This prompted the administrator and CoC to opt for the Challenge mechanism where the ₹3,000 crore was set as the minimum threshold value for upfront cash payments.
The challenge mechanism exercise is one of the largest value maximisation exercises undertaken as a part of solvency proceedings in India, industry participants said.