Tag: Siva Industries

Siva Industies lenders, slammed NCLT over settlement deal, to move NCLAT, BFSI News, ET BFSI

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The Siva Industries resolution has many a twist left.

After the National Company Law Tribunal rejected the one-time settlement offer made by Siva Industries and ordered that the company will go into liquidation, the lenders are planning to move the appellate tribunal NCLAT.

The NCLT order

The NCLT Chennai Bench, comprising R. Sucharitha and Anil Kumar B., said in the order, “The purported settlement plan proposed by the promoters of the Corporate Debtor is not a Settlement simpliciter, rather it is a ‘Business Restructuring Plan’. As per the plan, there is no final offer made by the promoter of the corporate debtor and also the acceptance made by the CoC in this regard. There is no finality reached between the promoter of the Corporate debtor and the CoC of the Settlement proposal; hence based on ambiguity of the terms of settlement, we cannot order for the withdrawal of CIRP.”

The order also said that seeking liquidation should there be a default was beyond the scope of IBC.

The NCLT said the application made by RCK Vallal, one of the shareholders of the company, is not conforming to the Section 12A of the Insolvency and Bankruptcy Code.

Paltry recovery

Eyebrows had been raised at the settlement offer as public sector banks agreed to settle with the promoter of Siva Industries, a huge loan of Rs 4,863 crore at just 318 crore — recovery of only 6.5 per cent.

Lenders were even withdrawing the bankruptcy process of Siva Industries,

It was pointed out that the settlement amount accepted by banks is even lower than the liquidation value of Siva Industries — will result in loss of approximately Rs 4,700 crore public money

Instead of invoking personal guarantee of promoters, the public sector bank Canara Bank privately sold its exposure of Rs 1,148 crore to a foreign owned ARC — International Asset Reconstruction Company Private Limited (IARC).

CBI has also filed criminal case against former senior officials of IDBI Bank and Sivasankaran for allegedly defrauding the lenders to the tune of Rs 600 crore.

Other rejections

Bankruptcy experts have termed the settlement unusual, citing the rejection of such offers by promoters in the past.

The acceptance of Sivasankaran’s offer differs from the usual pattern of rejection by creditors of such deals proposed by promoters seeking to withdraw their companies from bankruptcy proceedings.

Atul Punj of Punj Lloyd, Videocon’s Venugopal Dhoot, Sanjay Singal of Bhushan Power and Steel, and the Ruias of Essar Steel had all made offers to creditors to persuade them to drop bankruptcy proceedings. All were rejected.

In DHFL’s case, the promoter Kapil Wadhawan had offered to repay the debt in full, but the lenders ruled in favour of Piramal.

Experts say while banks may be getting the most out of such settlement in absence of any serious bid, but such a move weakens the IBC, especially Section 29A that bars promoters from bidding for their assets in a bankruptcy court. The Siva deal, if it goes through, could set a precedent of promoters striking settlement deals with banks when there are no bidders.



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NCLT orders liquidation of Siva Industries, BFSI News, ET BFSI

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The National Company Law Tribunal (NCLT) Chennai has dismissed the C Sivasankaran application and ordered the liquidation of Siva Industries.

NCLT said that Sivasankaran application under section 12 (A) does not stand. NCLT has also dismissed the SBI application.

Siva Industries and Holdings Limited (Siva Industries) will go into liquidation after the NCLT rejected the application.

This is as per provisions of the Insolvency and Bankruptcy Code where 90 per cent of the lenders had not given approval.

Lenders of Siva Industries and Holdings Limited (Siva Industries), founded by C. Sivasankaran (the former promoter of Aircel) had filed application under Section 12A of Insolvency and Bankruptcy Code 2016 (IBC) in National Company Law Tribunal (NCLT), Chennai Bench for withdrawing the insolvency proceedings against Siva Industries.
Siva Industries and Holding owes Lenders approx Rs 5,000 crore.

The settlement

The lenders to Siva Industries had told the National Company Law Tribunal that they will get 26% of their dues after taking into account third-party guarantors. Operational creditors were to get part of their dues under the settlement plan.

The deal had raised eyebrows as such offers by promoters were rejected in the past.
On the reason why they approved the 12A petition of promoters banks had told the court that if a company is liquidated or in a resolution plan involving a third party, all operational creditors, including tax authorities, are wiped out.

Also, the IDBI Bank‘s claim of Rs 644 crore will be paid while Blackstone-backed International ARC will get an additional amount of Rs 510 crore via land sale, they had said.

Unusual deal

Bankruptcy experts had termed the settlement unusual, citing the rejection of such offers by promoters in the past.
The acceptance of Sivasankaran’s offer differed from the usual pattern of rejection by creditors of such deals proposed by promoters seeking to withdraw their companies from bankruptcy proceedings.

Atul Punj of Punj Lloyd, Videocon’s Venugopal Dhoot, Sanjay Singal of Bhushan Power and Steel, and the Ruias of Essar Steel had all made offers to creditors to persuade them to drop bankruptcy proceedings. All were rejected.
In DHFL’s case, the promoter Kapil Wadhawan had offered to repay the debt in full, but the lenders ruled in favour of Piramal.



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BOM, SIDBI and IFCI reject resolution, move NCLAT, BFSI News, ET BFSI

Banking & Finance

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In an unusual move, lenders of Videocon Industries agreed to take the 95.85% haircut on the accounts. But not all. Out of the total 35 financial creditors, four have dissented and 12 have abstained from voting. The rest of the lenders voted for the resolution.

Out of four creditors who have decided to go against the resolution order of NCLT dated June 8, 2021, and appealed in the NCLAT, are bankers.

The dissenting financial creditors are Bank of Maharashtra, SIDBI and IFCI, while the other is ABG Shipyard, which holds O.024%.

The combined shareholding of the four dissenting creditors is around 4%.

“We are against the resolution because the quantum is very low. We do not believe that this is a fair valuation and hence we have appealed in the Appellate Tribunal,” said A S Rajeev, MD & CEO, Bank of Maharashtra.

Following are the percentage share of the creditors who rejected the Videocon Industries resolution plan:

Creditors Share Value
Bank of Maharashtra 1.97%
SIDBI 0.053%
IFCI 1.3%
ABG Shipyard Ltd 0.024%


Videocon valuation

The resolution team of the valuation experts concluded the total dues of Videocon Industries to Rs 4,069 crore. Whereas the liquidation value was Rs 2568.13 crore. The resolution plan of Twin Star Technologies, a company owned by the chairman of Vedanta Group Anil Agarwal, was approved against the actual dues of about Rs 71,000 crore.

“We should not only look at the balance-sheet value but think about the actual receivables as well,” added Rajiv.

Resolution process

There are many cases like Siva Industries, Jet Airways where financial creditors have taken a huge haircut. But among the high profile cases, Videocon Industries resolution is the only case where lenders have taken maximum haircut till date. Even the NCLT in its order observed this and made a sharp comment.

“As per the CoC approved Resolution Plan, Assenting Secured Financial Creditors would get only 4.89%, Dissenting Secured Financial Creditors would get only 4.56%, Assenting Unsecured Financial Creditors would get only very meagre amount of 0.62%. Out of total claim amount of Rs 71,433.75 crores, claims admitted are for Rs 64,838.63 crores and the plan is approved for an amount of only Rs 2,962.02 Crores which is only 4.15% of the total outstanding claim amount and the total hair cut to all the creditors is 95.85%. Therefore, the Successful Resolution Applicant is paying almost nothing and 99.28% hair cut is provided for Operational creditors,” the order said.

The top seven creditors which hold more than 7% of the debt and voted for the resolution in Videocon:

Creditors Share Value
State Bank of India 18.05%
IDBI Bank 16.6%
Union Bank of India + Corporation Bank + Andhra Bank 9.7%
Central Bank of India 8.43%
Bank of Baroda + Vijaya Bank + Dena Bank 6.93%
ICICI Bank 5.47%
PNB + OBC + UBI 5.02%

Liquidation takes over resolution

On one side, the top creditors want to wash away their hands and do not want to carry forward any stress, it’s the smaller lenders who are making some noise. Also, considering the huge loss to financial creditors, industry veterans and experts are criUnion Bank of India + Corporation Bank + Andhra Bankticising the whole resolution process.

Experts have been raising doubts over the whole resolution process.

In an interview with ETBFSI earlier, Siby Antony chairman of the ARC Association of India of said, “IBC is not the right solution. It is a resolution tool. If there is no resolution, automatically it goes to liquidation. That is a big problem. Resolution can be made if the underlying business is robust.”

Also, one of the top corporates Harsh Goenka has said that public money is being looted under resolutions. In the NCLT order itself, the bench has mentioned in the bracket (Hair cut or Tonsure, Total Shave).



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IL&FS recoveries may top 61%, lift sagging IBC average in 2021, BFSI News, ET BFSI

Banking & Finance

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Amid the near liquidation value recovery of Videocon and Siva Industries assets, IL&FS resolution may bring some cheer for the lenders.

At the group level, it is likely to recover 61% against the average 39% for IBC overall. The average IBC recoveries for the last fiscal had dropped to a quarter.

IL&FS is likely to recover Rs 61,000 crore assets from the group debt of Rs 99,000 crore as of October 2018, an increase of 5,000 crore over the earlier estimate.

“Between now and September 2021, we see this (Rs 43,000 crore of addressed debt) number going up in excess of Rs 50,000 crore. Thereafter, we are increasing our overall estimate of what we think we can resolve to Rs 61,000 crore, or close to 62 per cent, of the total debt,” Kotak said. The upgrade in potentially addressable debt by Rs 5,000 crore (to Rs 61,000 crore) has been largely on account of improved valuations, better operating performance and enhanced recoveries from non-group exposures, the Group had said in September. This includes the debt addressed through resolution, restructuring and liquidation across 347 IL&FS companies.

According to the quarterly newsletter of the Insolvency and Bankruptcy Board of India for March 2021, the recovery through resolution amounted to about 39% and through liquidation around 4%. According to bankers, recovery in the IBC process has had extreme outcomes.

The IL&FS playbook

As of end-March 2021, of the 347 entities, 186 have been resolved with Rs 43,000 crore of debt addressed.

The 347 companies in the group have been reduced to 167 and are expected to drop further to below 100 by the end of the year. This was done by shutting down or selling off a large number of foreign and local subsidiaries.

In the case of road projects, where conventional investors were spoilt for choice given the road projects on

sale, the board decided to go for the alternative option of setting up an infrastructure investment trust (InvIT).

While the new board has addressed a major chunk of the debt, the challenge is resolving IL&FS Financial Services and the remaining cases of dozens of companies where the amounts involved are relatively small. In the case of I-FIN, the board is understood to have dropped the plan to sell Rs 5,000 crore worth of loans after bids came in the range of 5%.



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RCom bidding may be back to square one, haircut may exceed 65%, BFSI News, ET BFSI

Banking & Finance

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Lenders of Reliance Communications are staring at lesser recovery prospects as they may have to go for fresh bidding.

They are worried that similar to the Aircel case, the Reserve Bank of India (RBI) is unlikely to permit asset reconstruction firm UVARCL buying RCom’s spectrum and other assets under a resolution plan.

The delay is rapidly eroding the value of the assets, especially spectrum, further depleting the amount the lenders were hoping to recover.

Aircel case

In the Aircel case, RBI denied UVARCL permission to buy Aircel’s assets for flouting norms under the Sarfaesi (Securitisation and Reconstruction of

Financial Assets and Enforcement of Securities Interest) Act. The RBI decision came even after the National Company Law Tribunal (NCLT) had approved the Aircel resolution plan.

According to the Sarfaesi Act, asset reconstruction companies cannot infuse equity into an insolvent company at the resolution stage.

The RCom resolution

RCom’s committee of creditors (CoC) cleared the resolution plan in March 2020, which would have seen UVARCL buy all assets, including spectrum, under RCom and Reliance Telecom, while a Reliance Jio unit was to buy the company’s towers housed under Reliance Infratel.

The plans were filed in the NCLT a few days later.

While the NCLT has cleared the tower sale to Jio, it has not cleared the transfer of the other assets to UVARCL yet. The tower sale, though, has not yet been implemented, with Jio recently approaching the NCLT with fresh concerns. RCom had filed for bankruptcy in 2019.

Under the resolution plan, UVARCL is expected to pick up RCom’s spectrum for Rs 12,760 crore, with the total recovery expected to be in the Rs 20,000-23,000 crore range against claims of Rs 57,382 crore, a roughly 65% haircut for lenders. Jio is to buy the towers for nearly Rs 5,000 crore.

Recovery worries

The IBC process has recently come under criticism after high-profile accounts such as Videocon were sold for near liquidation value and settlement in the case of Siva Industries yielded pittance.

The realisation for financial creditors from IBC declined significantly in FY2021 with a total resolution amount of around Rs 26,000 crore, almost a quarter of the realisations in fiscal 2020.

The pandemic has increased operational challenges for the various parties involved in a CIRP, which resulted in limited cases yielding a resolution plan. The suspension of new proceedings under the IBC for the entire FY21 resulted in a sharp slowdown in the resolution process.

Out of the total 4,300 cases that have been admitted to bankruptcy courts since FY17, only 8% has been resolved and nearly 40% of the cases are still pending. About 30% of the cases have seen liquidation.



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Lenders say they will get 26% of their dues, BFSI News, ET BFSI

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The lenders to Siva Industries have told the National Company Law Tribunal that they will get 26% of their dues after taking into account third-party guarantors. Operational creditors will get part of their dues under the settlement plan, according to a report.

The deal has raised eyebrows as such offers by promoters were rejected in the past.

The NCLT, Chennai, has to explain the rationale behind the one-time settlement (OTS) offer made by Siva Industries under Section 12A of the Insolvency and Bankruptcy Code (IBC), 2016. The lenders have also been asked to give the timeline of cash flow to all the creditors.

Until the last payment is made to the lenders within the deadline of 180 days set in the OTS application, the liabilities of the company will not be extinguished, according to the report.

On the reason why they approved the 12A petition of promoters banks told the court that if a company is liquidated or in a resolution plan involving a third party, all operational creditors, including tax authorities, are wiped out

Also, the IDBI Bank‘s claim of Rs 644 crore will be paid while Blackstone-backed International ARC will get an additional amount of Rs 510 crore via land sale, according to the report.

The settlement

Lenders of Siva Industries and Holdings have approved a one-time settlement proposal from the promoter under which they will take a 93.% haircut and just Rs 5 crore upfront cash.

Of the company’s total dues of Rs 4,863 crore, the IDBI Bank-led lenders will get Rs 313 crore, excluding upfront payment, within 180 day of receiving NCLT nod.

They will recover Rs 318 crore, with Rs 5 crore as upfront cash, out of the company’s total dues of Rs 4,863 crore. This amounts to a haircut of 93.5 per cent.

The holding company owes financial and other creditors about Rs 5,000 crore. Tata Sons had filed a claim of Rs 863 crore against the Sivasankaran group company but that was rejected by the latter’s interim resolution professional.

The creditors received an offer from Mauritius-based Royal Partner for the company but that was rejected on the grounds that the investor had been unable to demonstrate its seriousness in completing the deal.

Unusual deal

Bankruptcy experts have termed the development unusual, citing the rejection of such offers by promoters in the past.

The acceptance of Sivasankaran’s offer differs from the usual pattern of rejection by creditors of such deals proposed by promoters seeking to withdraw their companies from bankruptcy proceedings.

Atul Punj of Punj Lloyd, Videocon’s Venugopal Dhoot, Sanjay Singal of Bhushan Power and Steel, and the Ruias of Essar Steel had all made offers to creditors to persuade them to drop bankruptcy proceedings. All were rejected.

In DHFL’s case, the promoter Kapil Wadhawan had offered to repay the debt in full, but the lenders ruled in favour of Piramal.

Experts say while banks may be getting the most out of such settlement in absence of any serious bid, but such a move weakens the IBC, especially Section 29A that bars promoters from bidding for their assets in a bankruptcy court. The Siva deal, if it goes through, could set a precedent of promoters striking settlement deals with banks when there are no bidders.



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