A two-judge bench of the National Company Law Tribunal (NCLT) has cleared the resolution plan for 13 Videocon Group companies, paving the way for their acquisition by Anil Agarwal led Twin Star Technologies Limited at over 95 percent haircut for lenders.
The 13 Videocon group companies include Videocon Industries, Videocon Telecommunications, Electroworld Digital Solutions, Value Industries, Evans Fraser & Co, CE India, Millennium Appliances (India), SKY Appliances, PE Electronics, Techno Electronics, Applicomp India, Techno Kart India and Century Appliances.
Of the total claims of Rs 71,433.75 crores made by creditors, NCLT admitted claims of Rs 64,838.63 cores. The approved resolution plan proposes a repayment of only Rs 2962.02 crores which is 4.15 percent of the total outstanding claim amount, with the total haircut for creditors at 95.85 percent. This resolution amount is also barely above the liquidation value of the companies.
According to the valuation reports of the company, the fair value of the group companies was Rs 4069.95 crores and the liquidation value Rs 2568.13 crores.
The resolution plan proposes to pay the assenting secured financial creditors Rs 2779.05 crores against their admitted claims of Rs 56,215.66 crores, leading to a paltry 4.89 percent recovery. The secured dissenting financial creditors with Rs 2,306.63 crores of admitted claims are proposed to be paid Rs 105.23 crores, translating to a 4.56 percent recovery.
Of this, financial creditors would be paid only Rs 200 crores upfront, Rs. 2700 crores in the forms of NCD’s (carrying a coupon of 6.65 percent), available cash balances and 8 percent equity shares.
The assenting unsecured financial creditors are proposed to be paid Rs 15.72 crores against their admitted claims of Rs 2523.63 crores (0.62 percent recovery), and dissenting unsecured Financial Creditors are proposed to be paid nothing against their admitted claims of Rs 727.09 crores.
The operational creditors are proposed to be paid Rs 62.02 crores against their admitted claims of Rs 3003.3 crores (0.72 percent recovery). Other dues of Rs 165.32 crores will not be repaid, as per the resolution plan of Twin Star Technologies.
The resolution plan involves the delisting of shares of VIL (Videocon Industries Limited) and VAIL (Value Industries Limited) from BSE and NSE. It also involves a merger of the 11 corporate debtors (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 VIL.
Further, the plan proposes the settlement of trust of Rs 1,000 in favour of the financial creditors to hold in trust the investment of VIL and VTL in its Subsidiary Companies, Associate Companies and joint venture business. Upon its capital reduction and issuance of new equity shares of VTL to the implementing entity, merged VIL will hold the 100 percent equity share capital of VTL.
While approving the resolution plan submitted by Twin Star Technologies, the NCLT observed that the resolution applicant was paying close to the liquidation value to acquire the company, and suggested that the CoC and the Successful Resolution Applicant increase the pay-out to Operational Creditors especially MSMEs.
“The Successful Resolution Applicant is paying almost nothing and 99.28 percent hair cut is provided for Operational Creditors (Hair cut or Tonsure, Total Shave). During the course of the hearing it is also submitted that a voluminous number of Operational Creditors are also MSME and if they are paid only 0.72 percent of their admitted claim amount, in the near future many of these Operational Creditors may have to face Insolvency Proceedings which may be inevitable,” the court said.
The court has named an independent number for a steering committee to “supervise the implementation of the resolution plan, similar to what it did for DHFL recently.
The NCLT order read, “The Resolution Applicant shall act in active consultation with the Steering Committee constituted under the Resolution Plan and the Applicant and the Lead Bank Financial Creditors shall be a member of the Committee. They will supervise the implementation of the Resolution Plan under the discipline of the I&B Code. In addition to the above, this Adjudicating Authority feels appropriate to appoint an Observer Cum Permanent Invitee in the Steering Committee to ensure smooth functioning and change over to the Successful Resolution Applicant accordingly Mr R.K. Agarwal, Former Whole Time Member of SEBI, an expert in the field of Capital Markets and Finance is appointed by this Adjudicating Authority.”
SBI, IDBI Bank, Union Bank of India, Central Bank of India, Bank of Baroda, ICICI Bank, PNB, Indian Bank, EXIM Bank, Bank of India, Canara Bank, IOB are among key lenders to the Videocon Group.