Creditors of debt-ridden Videocon Industries Ltd will be taking nearly 96 per cent haircut on their loans and the bidder is "paying almost nothing" for the company, NCLT has observed while approving Anil Agarwal's Twin Star Technologies' Rs 2,962.02 crore-bid under the insolvency resolution process. Videocon Industries and its 12 group companies had a total admitted claims of Rs 64,838.63 crore.
The Mumbai bench of the National Company Law Tribunal has also observed that the resolution plan is giving 99.28 per cent to the operational creditors, which it sarcastically hinted to be as a "Hair cut or Tonsure, Total Shave".
It has requested the Committee of Creditors (CoC) and Twin Star Technologies to increase the pay-out amount to these operational creditors as they are getting only 0.72 per cent of their admitted claim amount.
Many of the operational creditors are also MSMEs and in the near future many of these operational creditors may have to face insolvency proceedings which may be inevitable, said NCLT in its order passed earlier on June 9.
"Out of total claim amount of Rs 71,433.75 crore, claims admitted are for Rs 64,838.63 crore and the plan is approved for an amount of only Rs 2,962.02 crore, which is only 4.15 per cent of the total outstanding claim amount and the total hair cut to all the creditors is 95.85 per cent," the NCLT observed.
It further said: "Therefore, the successful resolution applicant is paying almost nothing and 99.28 per cent hair cut is provided for operational creditors (Hair cut or Tonsure, Total Shave)." A two-member Mumbai bench of the NCLT comprising members - H P Chaturvedi and Ravikumar Duraisamy - had approved the resolution plan by Twin-Star Technologies on June 9 and a detailed judgement is filed by the company on Tuesday.
"As per the CoC approved resolution plan, assenting secured financial creditors would get only 4.89 per cent, dissenting secured financial creditors would get only 4.56 per cent, assenting unsecured financial creditors would get only very meagre amount of 0.62 per cent, dissenting unsecured financial creditors would get 'NIL/ZERO' amount and operational creditors would also get a very meagre amount of only 0.72 per cent," it said.
NCLT observed that during the course of hearing, it was submitted that voluminous number of operational creditors are also MSMEs and if they are paid only 0.72 per cent of their admitted claim amount, in the near future many of these operational creditors may have to face insolvency proceedings which may be inevitable.
"... therefore this Adjudicating Authority suggests, requests both CoC and the successful resolution applicant to increase the pay-out amount to these operational creditors especially MSMEs as this is the First Group Consolidation Resolution Plan of 13 companies having large number of MSMEs," it said.
The NCLT also noted that at the time of granting loan, restructuring, approving the resolution plan with such a huge hair cut also the financial institutions, Committee of Creditors consisting 35 members exercised their Commercial Wisdom.
"Since this is the commercial wisdom of the CoC and as per the various judgements of the Supreme Court and by following the judicial precedents, discipline the Adjudicating Authority (NCLT) approves the resolution plan of the successful resolution applicant with a suggestion, request to both CoC and the successful resolution applicant to increase the pay-out amount to these operational creditors especially MSMEs," it said.
As per the resolution plan, Twin Star Technologies will infuse funds by way of "equity or convertible securities or subordinate convertible loans or any other appropriate means to make such payments in full and in priority", the order said.
Twin Star Technologies would make an upfront payment of Rs 200 crore, out of which Rs 2 crore shall form part of the litigation corpus Along with that it would issues NCDs worth Rs 2,700 crore carrying a coupon rate of 6.65 per cent. Moreover, NCDs will be redeemable in five instalments - the first instalment of Rs 200 crore, will become due 25 months from the closing date and the second instalment of Rs 625 crore will be due three years from the closing date.
"...the third instalment of Rs 625 crores shall be due 4 years from closing date, the fourth instalment of Rs 625 crore would become due 5 years from closing date and the fifth instalment of Rs 625 crore become due 6 years from closing date," it said.
After implementation of the resolution plan, the financial creditors will receive 8 per cent of equity holding in Videocon Industries Ltd, on a post money fully diluted basis, it added.
While, the operational creditors, which has an admitted claims of Rs 1,178 crore and Rs 1,587.1 crore by the statutory creditors will get only Rs 10 crore.
"Rs 10 crore to be distributed proportionately among the operational and statutory dues," the plan said. Statutory dues such as income tax, sales tax, value added tax and various other taxes fall within the definition of operational debt.
The dissenting financial creditors, "shall be paid (in cash) their portion of the Upfront Payment before the assenting".
The resolution plan also asks for the delisting of shares of Videocon Industries Limited and Value Industries Limited from BSE and NSE and the process has to be completed within 44 days from the effective date of the plan.
It also mandates merger of all 11 companies of the group - Applicomp, CE India, Century Appliances, Electroworld Digital Solutions, Evans Fraser & Co, Millennium Appliances, PE Electronics, SKY Appliances, Techno Electronics, Techno Kart, Value Industries, (except Videocon Telecom Limited) into Videocon Industries.