Tag: videocon

Wadhawan, Dhoot may lose assets as banks move to invoke personal guarantees, BFSI News, ET BFSI

Banking & Finance

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The business tycoons whose bankrupt companies have been sold for a small fraction of the loans they owed may not be let off easily.

Lenders are in the process of appointing advisors to arrive at a fair value of their assets following the Supreme Court’s order on invoking personal guarantees of defaulting promoters.

Banks are assessing the value of assets held by promoters of at least 40 companies that are under the insolvency process, according to a report.

The promoters whose value of assets is being determined include Kapil and Dheeraj Wadhwan of DHFL; Videocon promoters Venugopal and Rajkumar Dhoot; Lanco Infratech’s Madhusudhan Rao and family, IVRCL’s Sudhir Reddy and Jatin Mehta of Winsome Diamonds.

Armed with the Supreme Court go-ahead to seize assets of personal guarantors, banks are looking to recover money parked in family trusts.

Many of the family trusts created by businesspeople are meant primarily to protect their assets from potential claims related to their companies, such as in bankruptcies. Neither lenders nor agencies such as the Enforcement Directorate or income tax department have been able to penetrate these asset protection trusts.

The SC verdict

The Supreme Court had upheld the validity of the Centre’s notification allowing banks to proceed against personal guarantors for recovery of loans given to a company under the Insolvency and Bankruptcy Code (IBC).

A bench comprising justices L Nageswara Rao and S Ravindra Bhat held that approval of resolution plan under the IBC does not discharge personal guarantors of their liability towards the banks.

“In the judgment, we have upheld the notification,” Justice Bhat said while reading out the conclusion of the judgement which decided as many as 75 petitions pertaining to the validity of the notification.

Petitioners had challenged the November 15, 2019 notification issued under the IBC and other provisions in as far as they relate to personal guarantors to corporate debtors.

Upholding the validity of the notification, the top court ruled that initiation of an insolvency resolution plan for a company does not absolve corporate guarantees given by individuals from paying up the dues to financial institutions.

The IBC law

Under the IBC law, banks can go after the family trusts formed by promoters or those who have given personal guarantees, provided there is a fraud or siphoning of money involved as per provisions of the IBC.

Promoters of several Indian companies had earlier accused their professional managers of fraud and diverting company funds. But they would not get any respite from the IBC as lenders will now invoke their personal guarantees.

SBI action

SBI was one of the respondents to the 74 petitions and challenges by promoters on invocation of personal guarantees. It has been in the forefront of invoking guarantees of promoters of defaulting companies. It had invoked Rs 1200 crore of guarantees given by Ambani for defaulting companies Reliance Communications and Reliance Infratel.

In January SBI had also approached the Mumbai bench of the NCLT to initiate invoking guarantees by the Videocon Industries Dhoot brothers totalling Rs 11,500 crore.

It had also taken Bhushan Power & Steel promoter Sanjay Singal to court to recover Rs 12,276 crore dues to the bank for which he was a guarantor. All these promoters had challenged these actions in court.



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With just 24% recovery rate, IBC lags other mechanisms, BFSI News, ET BFSI

Banking & Finance

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The Videocon resolution, which yielded less than 10% for lenders, has brought back recovery woes in the Insolvency and Bankruptcy Code mechanism in the spotlight.

Bankers have lost over Rs 40,000 crore in the Videocon account, as Anil Agarwal’s Twin Star snapped the company for less than Rs 3,000 crore.

While RBI has pointed to a recovery rate of 45% in IBC so far, barring the recovery rates in the top nine accounts, recoveries in other accounts average 24%. The top nine accounts were from the steel sector which led to good recoveries, while accounts in the power and infrastructure sectors struggle for buyers.

Recoveries from earlier resolution mechanisms resulted in a loss of nearly 70%.

Fiscal 2021 drop

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.

From its commencement in December 2016, 4,376 CIRPs have been admitted, of which 2,653 were closed till March 2021,

About 40% of the cases admitted by the NCLT were closed on appeal or settled or withdrawn under Section 12A which highlights that at least some promoters have been more willing to pay their dues to keep the IBC proceedings at bay. The extent of cases being referred to liquidation remains high at about 40% and only a quarter of such cases have seen the liquidation process come to a conclusion. The average realisation through liquidation has been a mere 3% of the claim amount.

Fiscal 2022 hopes

Although rating agency ICRA estimates that financial creditors could realise about Rs 55,000 crore to Rs 60,000 crore in FY2022 through successful resolution plans from the IBC. The higher realisation by the financial creditors would depend on the successful resolution of 8-9 big-ticket accounts, as more than 20% of ICRA’s estimated realisation for the year could be from these alone.



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Banks stare at over Rs 40,000 crore haircut in Videocon resolution, BFSI News, ET BFSI

Banking & Finance

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Lenders to Videocon Industries face over Rs 40,000 haircut after the National Company Law Tribunal allowed billionaire Anil Agarwal’s Twin Star Technologies to take over Videocon Industries Ltd for about Rs 3,000 crore.

Twin Star, a part of Vedanta Group, will pay around Rs 500 crore within 90 days as upfront payment and the rest as non-convertible debentures over a period of time.

The offer by the Dhoot family entailed repayments until 2035, which was not acceptable to many banks on Videocon’s Committee of Creditors (CoC), according to reports. Dhoot’s settlement offer was made for 13 out of the 15 Videocon group companies, which are jointly going through the Corporate Insolvency Resolution Process (CIRP). Two group companies — KAIL and TREND — were not covered under the offer. Though the bid is less, the Twin Star offer of Rs 3,000 crore is slightly higher than the liquidation amount of Rs 2,600 crore.

Videocon Industries and its 13 group entities owe Rs 61,770 crore to financial creditors. The State Bank of India claim is Rs 11,152 crore while IDBI Bank owes Rs 9,922 crore.

The Committee of the Creditors of Videocon Industries had voted in favour of the resolution plan of Twin Star Technologies Ltd, for 13 group companies with 95 per cent votes on December 11, 2020.

The NCLT order

A two-member Mumbai bench of the NCLT comprising members – H P Chaturvedi and Ravikumar Duraisamy – approved the resolution plan by Twin-Star Technologies.

Videocon Industries also confirmed the development through a regulatory filing. NCLT has pronounced the order on June 8, 2021 (Tuesday) approving the Resolution Plan for the Consolidated Corporate Debtors including the Company, under Section 31 of the Code, it said.

“The Approval Order has not yet been published and is currently awaited. Videocon Industries further informed, “in terms of the Resolution Plan, the equity shares of the Company are proposed to be delisted”.

Accordingly, an appropriate disclosure would be made upon receipt of the copy of the order by the NCLT approving the Resolution Plan, it added. This approval will also now consolidate Vedanta’s hold in Ravva oil field. Vedanta’s interest in Videocon is principally driven by the latter’s 25 per cent stake in the Ravva oil field in the KG Basin.

Following that the resolution plan was moved by the resolution professional before NCLT.

Later, the resolution Plan, as approved by the CoC, was filed with the NCLT for its approval on December 15, 2020. NCLT has conducted a consolidated corporate insolvency resolution process by combining Videocon Industries and other 12 Videocon group companies.



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Banks stare at over Rs 40,000 crore haircut in Videocon resolution, BFSI News, ET BFSI

Banking & Finance

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Lenders to Videocon Industries face over Rs 40,000 haircut after the National Company Law Tribunal allowed billionaire Anil Agarwal‘s Twin Star Technologies to take over Videocon Industries Ltd for about Rs 3,000 crore.

Twin Star, a part of Vedanta Group, will pay around Rs 500 crore within 90 days as upfront payment and the rest as non-convertible debentures over a period of time.

The offer by the Dhoot family entailed repayments until 2035, which was not acceptable to many banks on Videocon’s Committee of Creditors (CoC), according to reports. Dhoot’s settlement offer was made for 13 out of the 15 Videocon group companies, which are jointly going through the Corporate Insolvency Resolution Process (CIRP). Two group companies — KAIL and TREND — were not covered under the offer. Though the bid is less, the Twin Star offer of Rs 3,000 crore is slightly higher than the liquidation amount of Rs 2,600 crore.

Videocon Industries and its 13 group entities owe Rs 61,770 crore to financial creditors. The State Bank of India claim is Rs 11,152 crore while IDBI Bank owes Rs 9,922 crore.

The Committee of the Creditors of Videocon Industries had voted in favour of the resolution plan of Twin Star Technologies Ltd, for 13 group companies with 95 per cent votes on December 11, 2020.

The NCLT order

A two-member Mumbai bench of the NCLT comprising members – H P Chaturvedi and Ravikumar Duraisamy – approved the resolution plan by Twin-Star Technologies.

Videocon Industries also confirmed the development through a regulatory filing. NCLT has pronounced the order on June 8, 2021 (Tuesday) approving the Resolution Plan for the Consolidated Corporate Debtors including the Company, under Section 31 of the Code, it said.

“The Approval Order has not yet been published and is currently awaited. Videocon Industries further informed, “in terms of the Resolution Plan, the equity shares of the Company are proposed to be delisted”.

Accordingly, an appropriate disclosure would be made upon receipt of the copy of the order by the NCLT approving the Resolution Plan, it added. This approval will also now consolidate Vedanta’s hold in Ravva oil field. Vedanta’s interest in Videocon is principally driven by the latter’s 25 per cent stake in the Ravva oil field in the KG Basin.

Following that the resolution plan was moved by the resolution professional before NCLT.

Later, the resolution Plan, as approved by the CoC, was filed with the NCLT for its approval on December 15, 2020. NCLT has conducted a consolidated corporate insolvency resolution process by combining Videocon Industries and other 12 Videocon group companies.



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