IBC: Expect Smooth Handover Of Binani Cement To UltraTech, Says Group Adviser
The Supreme Court has confirmed UltraTech Cement Ltd. as the winning bidder for insolvent Binani Cement Ltd. In doing so the apex court has upheld last week’s decision by the National Company Law Tribunal and dismissed a petition by competing bidder Rajputana Properties Ltd, owned by the Dalmia Bharat Group.
This decision works to the advantage of the Binani Group as UltraTech had offered a higher bid value in which all creditors will be repaid. Several operational creditors are reportedly related parties of the Binani group and its promoter Braj Binani. Certain promoter guarantees are also covered by the bid, said Sameer Kaji, adviser to the Binani Group.
And though at one time the parent, Binani Industries, had sought to withdraw Binani Cement from the insolvency resolution process, adding to a complex web of litigation, the promoter is now willing to hand over the company to the winning bidder.
“In this instance, the corporate debtor is not going to be hostile. It is going to be a smooth handover because all possible liabilities are being met.”
Kaji also expressed dismay at the time taken to complete the resolution process and the impact of delays on plant operations.
If you look at it from the company perspective, there has been a lot of insecurity among various people (employees). Lot of key people have left. It’s not clear if plant maintenance was done properly or not, all these issues have to be addressed by the successful applicant.Sameer Kaji, Adviser, Binani Group
Watch the interview with Sameer Kaji here. It was recorded right after the NCLAT decision was announced.
Edited excerpts of the interview.
So, you (Binani Cement) are now entirely out of the picture?
The corporate debtor has no longer any role to play because the decision was taken by NCLAT. So, it is between UltraTech Cement and if at all depending on what the outcome is on Monday regarding Rajputana. So, Binani Cement, the corporate debtor is out of the picture.
The resolution process narrowed to Ultratech and Dalmia as the top two bidders. Meanwhile you did attempt to withdraw the company from the insolvency resolution process earlier this year and proposed to repay debtors with help from UltraTech?
UltraTech made an independent bid as one of the 5 or 6 resolution applicants in January 2018. In March, Binani, the corporate debtor decided to exit the corporate insolvency resolution process. At which time the decision was taken that we would fund all the possible liabilities, whether secured and unsecured. For which help was taken from UltraTech. In the order yesterday, it has been turned down (by the NCLAT) because subsequent to the application we made, in June there was new rule which came up in the Insolvency and Bankruptcy Code where 90 percent of lenders need to support an exit and it must be done before expressions of interest are invited. We no longer qualify for it.
In the original IBC there was no provision for withdrawal of an insolvency resolution process. It is in June this year that the provision (Section 12A) was introduced in the IBC.
When we did this it was an evolving process. People thought that this could be a possible way out. Rather than getting into controversy, work out a way where there is possibility.
The NCLAT said that Section 12A (new provision) cannot apply to you because your effort to withdraw from the insolvency process was made before Section 12A came into existence. Are you going to challenge the NCLAT decision?
No, we are not.
Do you have a view, that the winning bidder should be UltraTech or Dalmia?
The only view the corporate debtor will have is if you maximise value by ensuring all stakeholders (creditors) get settled. In this instance, every stakeholder will get settled. There are certain cross bank guarantees being given by the associate companies by the corporate debtor. If you assume for a moment that lender A is not paid 100 percent, for the differential amount there would have been always a possibility that lender A would have staked a claim on the corporate debtor or associate companies because there is a bank guarantee in place. In this instance, if a resolution applicant is meeting 100 percent of liability, the corporate debtor has no role and why would one object.
The UltraTech offer is more advantageous to Binani. Whether it was in the case of operational creditor claims, some of which were made by related parties of the Binani Group, or guarantees, the UltraTech offer seeks to pay all outstandings - which is more beneficial to the promoter Binani family than the Dalmia bid. You should be happy and willingly go along with any transfer of ownership to the Ultratech.
In this instance, the corporate debtor is not going to be hostile. It is going to be a smooth handover because all possible liabilities are being met. In this instance, UltraTech is also paying interest post the company being accepted into NCLAT, since July 2017. So, the lenders start to benefit far more than they would have been benefited with any resolution applicant.
The cement business has been the cash cow for the Binani Group. How do you feel now that the door is firmly closed on any effort or chance of possibility of you being able to retain the asset.
This reality had to come. Since March 2017 or April 2017, it was a matter of timing. This has finally happened. It was already taken into the promoter’s scope of things. He is now going to move on with other opportunities which he may want to pursue. So, this chapter is closed.
Even in effort to withdraw the asset from insolvency process, that you will be getting funding from Ultratech, the implicit arrangement was you will sell it off?
That’s right and we have accepted it.
During the resolution process, based on the forensic audit, there were some allied investigations into financial transactions within the group, regarding earlier loans, use of funds... Do you believe that all those liabilities will be transferred now to Ultratech?
None of these things that were under discussion, during Committee of Creditors or Resolution Professional’s process, have reached any conclusion because there were various thoughts on same. You need to prove something that liability is X and if not X then it is Y. None of this has moved and there has not been any documentary evidence. Most questions asked to the corporate debtor have all been answered as on date to the satisfaction of the CoC and resolution professional. At the moment, we don’t have any open ends.
You don’t think that any of those investigations, liabilities will come to haunt you as a group?
I don’t think so. As far as Binani Cement goes, none of the related transaction of Binani Cement will haunt the Braj Binani business (promoter).
What will be the transition process in the ownership of Binani Cement now?
The only feeling I have as an independent professional is that a lot of time has been wasted. We could have ended these (proceedings) six months back, which has been at a cost to the asset. At the end of the day, you are losing value. If you look at it from the company perspective, there has been a lot of insecurity among various people (employees). Lot of key people have left. It’s not clear if plant maintenance was done properly or not, all these issues have to be addressed by the successful applicant. So, there is a cost attached to it. Having said that, it is positive thing as far as IBC or NCLT is concerned. Gradually, things are clearing out, whether it is Essar or Binani. With 2-3 more resolutions, you could have a lot of clarity. The time frame will fall back to 180- or 270-day period.