Srei panel of creditors unlikely to go for rebid or second round of challenge mechanism

Kolkata, January 13 The Committee of Creditors (CoC) may not consider rebidding or conducting a second round of challenge mechanism for the insolvent Srei group entities since all the three bids submitted by the resolution applicants are “financially viable” and are much above the liquidation value and fair realisable value suggested by the independent valuers.

Independent valuers had pegged the liquidation valuation at around Rs 5,000-6,000 crore and a fair realisable value of around Rs 8,000-9,000 crore.

Following the completion of the challenge mechanism process, state-backed NARCL’s offer was Rs 5,555 crore in NPV (net present value) terms, including upfront cash of Rs 3,180 crore; Authum Investment and Infrastructure’s bid in NPV terms was for Rs 5,526 crore; and the consortium of Varde Partners and Arena Investors’ financial bid in terms of NPV stood at around Rs 4,680 crore, including a Rs 3,250-crore upfront cash amount.

Recently, the CoC for Reliance Capital approved a second round of auction, citing value maximisation of assets as the bids received were below the liquidation value of Rs 12,500-13,000 crore.

“The liquidation value and the fair realisable value were discussed at the CoC meeting recently, and that has been taken into cognisance. The financial bids are close to Rs 14,000 crore and Rs 10,000 crore, and even in cash component and NPV terms, the bids submitted are much higher than the liquidation value and fair realisable value. There is no question of going in for rebidding as it will be a never ending process then,” sources close to the development said.

The administrator Rajnish Sharma was not available for comment.

According to sources cited above, the CoC, on Thursday, held detailed discussions with the PRAs (prospective resolution applicants) regarding certain technical non-compliances in the bids submitted by them, and has advised them to submit fully compliant bids by January 14. Bids, which are fully compliant under IBC and RFRP (Request for Resolution Plan), will be put for CoC vote on January 16.

“The financials have been closed, there were only some technical non-compliances and the CoC and PRAs have agreed to submit the fully compliant bids by January 14. The bids will go for CoC vote on Monday,” sources said.

Scope for value maximisation

However, there is scope for further value maximisation in case of Srei, since the underlying assets are likely to be recovered in due course. Further, the bids received so far might lead to steep haircuts, said Mamta Binani, an insolvency resolution professional. 

According to a spokesperson for the Kanorias, the very set of bankers who had refused full repayment of loans by the erstwhile promoters under Section 230, with interest, and decided to drag the companies under IBC, are now willing to accept much lower bids from bidders.

“How is this acceptable to lenders, regulators, policymakers and stakeholders? Bankers who refused full recovery and are now accepting far lower settlement, should be held accountable for this loss of public money. It is ironical that when the borrower (Srei) honestly wanted to pay full money to the creditors, some bankers decided to take the companies to bankruptcy and then buy back the same through their owned NARCL, giving themselves a deep haircut and blaming the erstwhile management,” the spokesperson for Kanorias said.

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