Banking News

SREI takeover news: NCLAT rejects Authum plea on SREI; NARCL completes payments


The National Company Law Appellate Tribunal (NCLAT) has dismissed Authum Investment & Infrastructure’s appeal against the takeover of the twin Srei non-banking financial companies by the National Asset Reconstruction Co Ltd (NARCL), clearing the roadblocks for the smooth takeover of the companies.

In 42 page order order a two-judge bench of NCLAT chairman Ashok Bhushan and Barun Mitra said they did not find any errors in the NCLT order rejecting Authum Investment & Infrastructure’s plan in August 2023 and that there were no grounds in the appeal.

“We have found that the CoC has considered the resolution plan in accordance with the evaluation matrix and there were no error in determination of the NPV of the Respondent No.2 (NARCL). Further, the appellant was not entitled for any marks on equity allotment to the financial creditors which mark was rightly not given to the appellant in the evaluation matrix,” the order said.

NCLAT Rejects Authum Plea Against Takeover of Srei Twins

The order comes as a boost to the beleaguered NARCL, which has been struggling to complete the transactions. The Srei acquisition is the company’s largest transaction and the first through the bankruptcy process.

Rajneesh Sharma, administrator to Srei Infrastructure Finance Ltd (SIFL) and Srei Equipment Finance Ltd (SEFL), said though formalities such as payments by NARCL and issuance of debentures and security receipts were completed in December, the court’s order means the handover will be completed in the next few days.

“The NCLAT order only confirms that the NCLT decision was genuine. The order confirms implementation of the plan without any issues. We had completed all formalities in the last week of December as per the timeline and were just waiting for this order. We expect to complete the handover to NARCL in the next 10 days,” Sharma said.NARCL’s offer was valued at Rs 5,555 crore on a net present value (NPV) basis, higher than the Rs 5,526 crore offered by its nearest competitor, Authum Investment & Infrastructure, a recovery of 17% on an NPV basis on total admitted total claims of Rs 32,750 crore from financial creditors.In September last year, ET had reported that NARCL had distributed to lenders Rs 2,580 crore of cash accumulated in the Srei twins as part of the debt-resolution.

The amount was distributed as part of the Rs 3,180 crore upfront payment promised by NARCL in its winning bid. The remaining Rs 600 crore was distributed on December 22, within the 45 day time frame to implement the plan, Sharma said.

“Further the Rs 3,487 crore of security receipts (SRs) which are backed by non-convertible debentures and Rs 8,000 crore of optionally convertible debentures (OCDs) have all been issued in the last week of December 2023 which means all creditors have been paid back according to the plan,” Sharma said.

Besides the Rs 8,000 crore OCDs payable in six to eight years, lenders have also been offered 20% equity in the company which is linked to the recoveries the bad bank can make in the future.

The Srei companies were taken to the bankruptcy courts in October 2021 on insolvency petitions filed by the Reserve Bank of India.

After the Kolkata NCLT had approved NARCL’s plan in August last year, the losing bidder, Authum Investment & Infrastructure, challenged it in the NCLAT, offering an additional Rs 450 crore. Though the tribunal admitted its petition, it did not impose a stay on implementation of NARCL’s plan, as a result of which the bad bank has implemented the plan.

For Authum Investment & Infrastructure, the rejection by the NCLAT means that the only recourse to challenge the order now is in the Supreme Court.


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