Jyoti Structures, one of the 12 entities from the first central bank list to be taken to bankruptcy courts, would head into liquidation, inflicting a loss of Rs.7,000 crore on the affected bankers, people in the know told ET.
April 2 is the deadline for hammering out a resolution plan for the debt-laden company. In total, 66 per cent lenders voted in favor of a revival proposal submitted by a clutch of ultra-high-net-worth individuals, led by Netmagic founder Sharad Sanghi, but the remaining lenders voted against the bid. All decisions of the Committee of Creditors require the approval of not less than 75 per cent of the lenders.
The decision to take the company into liquidation comes after three failed attempts to sell the assets.
“Had this proposal gone through, it would have sent out a signal that banks could be taken for a ride,” said a banker who did not wish to be named.
In a notice to the stock exchanges, the company said that while the resolution professional had sought the approval of the committee of creditors to the final resolution plan submitted by the Resolution Applicant for Jyoti Structures BSE -4.94%, the proposal was rejected due to the lack of requisite majority.
“The drawback in the proposal was that the recovery will be made from the cash flows of the company. So if the company doesn’t do well, then no money will come in,” said another banker, who also did not wish to be named. “We even approached some past bidders so that they can submit some proposal even on a subcontracting basis, but there was no interest.”
Sources in the know said that the committee of creditors rejected the offer because the haircut was steep and almost on a par with the liquidation value. Lenders did not agree to the plan that payments were to be made over 15 years and that the resolution applicant had sought four years’ moratorium to start repaying the dues.
Lenders were also skeptical about the resolution as the bidders had no prior experience in carrying out engineering, procurement and construction (EPC) work.
Sharad Sanghi had teamed up with private equity executive Manish Kejriwal and Manipal Group’s Ranjan Pai and proposed to invest Rs.150 crore in the company and pay banks Rs 3,000 crore over 15 years, which in current value amounted to Rs.1,100 crore. The investors had also sought fresh working capital loans of Rs 250 crore from lenders, while bank guarantees totaling Rs.1,000 crore would continue in the form of new limits for the company’s use in the ongoing projects.
Jyoti Structures was among the first list of 12 companies referred by the central bank for debt resolution under India’s new Insolvency and Bankruptcy Code. Jyoti Structures is among the power sector firms that were hit by a lack of fuel linkages or troubles in completing land acquisition. It specialises in power transmission, distribution and EPC projects.
Source- Economics Times