A weaver uses a handloom to make a silk sari at a workshop in Varanasi, Uttar Pradesh, India (Photographer: Dhiraj Singh/Bloomberg)

Lenders Reject JM Financial ARC-RIL’s Bid For Alok Industries

A joint resolution plan submitted by JM Financial Asset Reconstruction Company Ltd. and Reliance Industries Ltd. has not met with approval of the committee of creditors of Alok Industries Ltd., RIL said in a late-evening stock exchange notification today.

The 270-day deadline for the corporate insolvency resolution programme under the insolvency and bankruptcy code ended on Saturday, April 14, for Alok Industries. In the absence of an approved resolution plan at the end of this period, IBC provides for the beginning of a liquidation process for the company’s assets.

The CoC for Alok Industries met on Friday to discuss and further negotiate the resolution plan, and the JM-RIL combine was the only bidder for the asset. At the meeting, the CoC did not approve the Rs 5,000-crore offer by the bidder, against an outstanding debt of  Rs 29,000 crore, and lenders insisted on certain conditions being met before approving the plan.

Among the conditions laid down by the CoC:

  • Lenders would get first charge on Rs 9,000 crore worth receivables in Alok Industries, ie: when these receivables are realised, lenders would be paid first.
  • Lenders would have the right to invoke corporate guarantees issued by the current promoters of the textile company.
  • Lenders would get the remaining 9.5 percent promoter stake in the company.

Alok Industries is one of the 12 large companies to have been sent to the National Company Law Tribunal for insolvency proceedings after the Reserve Bank of India shortlisted them in June 2017. These companies together accounted for Rs 2.77 lakh crore worth of bad loans in the banking system.

Apart from Alok Industries, the 270-day deadline has run out for Monnet Ispat & Energy Ltd. and Jyoti Structures Ltd. The CoC for Monnet Ispat has approved a joint resolution plan submitted by JSW Group and AION Capital. In case of Jyoti Structures, lenders approved a plan submitted by a consortium of 50 investors after the deadline ended. Resolution professional for Jyoti Structures, Vandana Garg, has approached the NCLT for the extension to be approved.

According to data put together by BloombergQuint, five of the 12 companies are in the last lap of insolvency proceedings, as lenders have approved resolution plans, but the NCLT has yet to put its seal of approval on them.