RIL has no rights on existing receivables of Alok from its suppliers and customers
Reliance Industries Ltd (RIL), which, along with JM Financial Asset Reconstruction Company, won the bid for Alok Industries, will have no rights on the Rs 11,000 crore existing receivables when it takes over the bankrupt textile company.
Banks have not let go of the charge on the receivables of the company from its suppliers and customers, senior bankers told DNA Money.
Alok Industries was one among the dirty dozen accounts handpicked by Reserve Bank of India (RBI) to be resolved under the Insolvency and Bankruptcy Code (IBC) 2016. It will also be the company which goes with the steepest haircut of over 80% to RIL-JM Financial ARC combine, the lone bidder under the IBC. This means that the company is sold for over 80% discount to the total loans of around Rs 30,000 crore.
In the first round of bidding, RIL-JM had offered Rs 4,950 crore for the troubled textile company, but the bankers refused to part with the company. Alok Industries will now be sold for Rs 5,050 crore after the initial bid was improved by Rs 100 crore. The 10,000-strong workforce, including 4,000 tribal workers on the company's rolls, were also up in arms against liquidation citing job losses.
A senior banker who is part of the consortium said, "Banks still have a charge on Rs 11,000 crore of the receivables. The creditors committee which met on June 22 saw about 72.19% voting in favour of the resolution submitted by RIL and JM Financial ARC. The court also had reservations against the liquidation plan fearing job losses."
It narrowly escaped a liquidation, the lenders had initially intended when it rejected the poor bid value. But the court asked the bankers to re-examine the bid to protect the jobs of the employees.
Once sold, Alok Industries will be the third case to be resolved through the IBC after Bhushan Steel and Electrosteel. Bhushan Steel was sold at a discount of 32% to Tata Steel, while Electrosteel was taken over by Vendanta at a 50% discount.
The resolution plan was finally approved on Friday, with 72% of lenders voting in its favour in the third round of bidding. The resolution has been facilitated by the amendment in the IBC that requires the approval of a minimum of 66% of lenders as against 75% earlier.
When the 270-day deadline for resolution got over the resolution professional filed for liquidation at the Ahmedabad Bench of National Company Law Tribunal (NCLT). The court asked the lenders to reconsider the bidding to protect the employment of the huge workforce. RIL-JM Financial ARC alliance now requires the approval of NCLT to gain control of Alok Industries.
WEAVING A SOLUTION
- 80% losses taken by banks on the Alok Industries loan
- Rs 5,050 cr the company would be sold at, after the intial bid was improved by Rs 100 crore
- Rs 30,000 cr Total loans of Alok Industries
- 10,000 workforce with Alok Industries
- Rs 4,950 cr offered by RIL-JM Financial ARC if first round of bids
- 72.19% of creditors had voted in the favour of RIL-JM Financial ARC
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