Alok Industries: Bank union questions liquidation value and demands investigation
Lenders to Alok Industries Ltd took a haircut of 84% in approving Reliance Industries Ltd (RIL)-JM Financial Asset Reconstruction Company (ARC)’s resolution plan to take over the bankrupted textile company. However, in a statement, DT Franco, General Secretary of All India Bank Officers' Confederation (AIBOC) says, "The RIL-JM combine has offered just Rs5,050 crore for the acquisition of Alok Industries, which owes close to Rs30,000 crore to a consortium of banks and operational creditors. We wonder how the National Company Law Tribunal (NCLT) allowed only one bidder in this case. How Reliance Industries, which is the biggest borrower in the country, allowed to become a bidder? This requires a thorough probe."
 
AIBOC says as per the 2017 balance sheet, Alok Industries had tangible assets of Rs16,762.93 crore, while current assets were Rs14,459.18 crore. "If its total assets were Rs32,708.99 crore and total current liabilities were Rs21,717.59 crore, how in just one year, its value can become Rs5,050 crore?" the union asks.
 
Alok Industries was started in 1986 and is a ISO 9001:2000 certified textile manufacturing company. It has 250 stores in India under the brand name H&A. It also has 100% owned subsidiary in Czech Republic. 
 
RIL-JM Financial ARC had emerged as the sole bidder for the Alok Industries in the first round of auction held in March 2018, but lenders baulked at accepting the resolution plan which required them to take 85% haircut. RIL-JM FARC later raised its offer price by Rs100 crore. But lenders again rejected the resolution plan. The resolution plan was finally approved with 72% of lenders voting in its favour. 
 
The resolution has been facilitated with the assistance of the government by the amendment in the Insolvency and Bankruptcy Code (IBC) that requires the approval of only a minimum of 66% of lenders as against 75% earlier. It is quite clear that IBC has been amended with the only objective to allow the RIL-JM taking over Alok Industries and in the process the banks have to endure the haircut of 83%.
 
"At a time, when the banks are already struggling to cope up with the rise in non-performign assets (NPAs) and decline in their net profits, such a step on the part of the government to further weaken the banks is very unfortunate, " AIBOC says adding, "Our Confederation condemns such a pro-corporate and anti-public sector banks approach on the part of the government and RBI. In the name of cleaning up the balance sheet, now the banks are forced to allow 83% haircut and benefit the corporate and again when the net profits will come down, it will be the same bankers who are to be blamed for the same."
 
The bank officer's union had asked the government not to move ahead with the sale of Alok Industries. "AIBOC demands that the government does not move ahead with this plan of benefitting the RIL-JM Financial ARC and thereby destroying the Indian public sector banks. We further clarify that our Confederation has also been monitoring all these developments which will jeopardise the existence of the PSBs and we will not remain silent spectator to all these for an indefinite period of time," the union warned.
 
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    COMMENTS

    Ashok Mane

    1 year ago

    Banks should have sold all assets in part at market rate and adjusted loans.
    Instead of taking loss by banks. They should have taken over assets and lease out it in small parts to small business houses.

    Ashok Mane

    1 year ago

    Banks should have sold all assets in part at market rate and adjusted loans.
    Instead of taking loss by banks. They should have taken over assets and lease out it in small parts to small business houses.

    Bplvvarma

    1 year ago

    So what is the future of Alokindustries. Is it stands by profit coming out from insolvency in business

    BV SUDHANVA

    1 year ago

    If the deal was so attractive then why no one else bid for alok?

    Ramesh Poapt

    1 year ago

    very well done by union. they must strongly take up the issue otherwise
    there will be repetition of the same!

    Amar Kunal

    1 year ago

    Where this Franko has been hiding while his banks were giving loans to Alok Industries and it was in bad debt, now while the employees of Alok Industries are safe and planning for the future course of action such elements are questioning about the deal? AIBOU is always unethical and acts against the interest of people, your main business is to call strikes for your unethical demands and harass people. If you will do such thing the same thing will come to you. Investigation should be carried on against corrupt bankers who give money to Videocon, Nirav Modi etc and elements like AIBOC and their mentors may be among them.

    Dr.Dhananjaya Bhupathi

    1 year ago

    https://www.moneylife.in//article/alok-industries-bank-union-questions-liquidation-value-and-demands-investigation/54499.html via @MoneylifeIndia
    1. HATS OFF TO COMRADE D.T.FRANCO. ENTIRE BANK EMPLOYEES & THE RETIREES ARE HAPPY TO NOTE YOUR PROMPT REACTION. WE ARE WITH YOU SIR!
    2. HOW SHAMELESS ARE IBA BOSSES & PSB MANAGEMENTS OFFERING HAIR CUT OF 84% OF DUES, AS IF PUBLIC DEPOSITS IN PSBs ARE THEIR GRAND FATHERS' PROPERTIES.
    3. WE NEVER MIND, IF THE PROLIFERATERS OF SUCH DUBIOUS IDEAS INDULGE IN '84% HAIR CUT THEMSELVES' AND ATTEND RESPECTIVE BANKS.
    4. I REPEAT MY ALLEGATION THAT THE EPICENTER OF ALL PSBs' SCAMS IS IBA EXECUTIVE MEMBERS. NO ELECTIONS, NO REGISTRATION UNDER ANY INDIAN ACT, NO AUDIT OF 'RECEIPTS & EXPENDITURE STATEMENTS.
    5. ACTION MAYBE INITIATED AFTER PERUSAL OF CURRENT ACCOUNT WITH OBC, CUFFE PARAADE, WTC, MUMBAI .
    6. EARNEST ENDEAVORS OF GOI WITH A POLITICAL WILL, ARE APPRECIATED BY ENTIRE 125 CRORE INDIANS. UNLESS & UNTIL THE ROT IN PSBs IS ADDRESSED @ THE RIGHT EARNEST, MODIJI CAN NEVER REALIZE HIS 'WONDERFUL VISION + DREAM TO PUT INDIAN ECONOMY ON "HIGH GROWTH TRAJECTORY" FOR THE BENEFIT OF TEAMING MILLIONS OF YOUTH.
    7. I, EARNESTLY, APPEAL TO ALL BANK EMPLOYEES + BANK RETIREES TO REACT ON FB,TWITTER & INSTAGRAM.
    ALL BANKMEN MAY KINDLY APPRECIATE COMRADE D.T.FRANCO'S INITIATIVE EXPRESSING OUR SOLIDARITY.
    SATYAMAEVA JAYATHE!!!

    Lakshminath Mocherla

    1 year ago

    Obviously Govt wants to do a favour to the purchaser they coaxed the lenders not to pursue further.

    RBI’s propaganda on basic saving account falling flat
    Every day for the past two months, even existing customers of Axis Bank have received a promotional mailer captioned - "Get Your Zero Balance AXIS ASAP Savings Account in 3 Easy Steps”. For the first time in its history, the Reserve Bank of India’s (RBI) has also woken up to the need to promote financial safety and options. Among the messages it has sent out to our mobile phones is one promoting the Basic Savings Bank Deposit Accounts (BSBDA), which has no minimum balance requirement and no additional cost. The RBI is also promoting this through emails and advertisement in newspapers and on websites.
     
    Does this mean that banks are now bending backwards to promote basic, no-frills accounts where they cannot lop off a punitive charge for not maintaining average minimum balance? Has banking suddenly turned more consumer friendly? Moneylife decided to investigate by visiting dozens of bank branches to try and open a BSBDA account in banks around our office at Shivaji Park at Dadar in Mumbai. The industry calls it “mystery shopping’. It should be no surprise, that the reality, but for a few notable exceptions, was vastly different for the person on the street who wants to open a basic account. 
     
    The Basic Savings Bank Deposit Account –BSBDA- is an account, which offers basic banking facilities at almost no additional costs, says the RBI’s advertising blitzkrieg. However, the reality is startlingly different. Not many banks even offer this BSBDA facility to customers. When I posed as a potential customer and asked to open the account, some bankers feigned ignorance while other discouraged me by saying that there are no real benefits offered in such accounts. 
     
    State Bank of India (SBI) Ranade Road, Dadar (W), Mumbai - 400028
     
    I approached State Bank of India (SBI) for a BSBDA account. The bank officials claimed they were unaware about these accounts. Upon persisting with my request and showing them the RBI SMS, I was told that though this facility is not available with their branch, it may be available with some other branch of the Bank. This is contradictory to claims made by SBI on its website, which says BSBDA facility is available at all branches.  
     
     
    Axis bank, Ranade Road, Dadar (West), Mumbai - 400028
     
    When contacted Axis bank, which has been very aggressive in promotion of BSBDA their reply was that the account can be opened in any branch located nearest to permanent address mentioned in the ID card (Aadhaar).
     
    In addition, only the person who had received their advertorial e-mail or SMS can open the BSBDA account after submitting details online through the link available on the messages. There is no offline facility for opening this account and one can only connect through a link in their promotional mailers. This is rather strange because the bank is sending out mass emails that are also spamming its regular account customers, including those who are its ‘priority’ customers and unlikely to be opening a BSDBA account.
     
    Incidentally, the bank continues to send out an email every single day pushing this no-frills account. Considering the cost involved in mass emails, we wonder what the purpose of such spending. The BSBDA asks for mandatory Aadhaar details, which even the Supreme Court has not decided yet since the UIDAI judgement in pending.
     
     
    Cosmos Bank, Gokhale Road, Dadar (W), Mumbai - 400028
     
    After checking with nationalised banks, I then headed to Cosmos Bank which is multi-scheduled co-operative bank. However the employee there was too quick in replying me that no such BSDBA facility is available with the Bank. “It may be available with the nationalised banks,” he replied. 
     
    Shamrao Vithal Co-operative Bank, Ranade Road, Dadar (W), Mumbai – 400028
     
    In other scheduled bank, SVC Co-operative Bank, I found that BSBDA facility was available with them. However, the bank employee was very discouraging towards me from opening such account saying that BSBDA does not offer cheque book and there are several restrictions on BSBD account intimating me to open a savings account with them. 
     
    Here is feedback from some other banks in and around Shivaji Park…
     
     
    The Reserve Bank of India’s (RBI) circular of BSBDA issued on 10 August 2012 is here
    Some of the salient features of BSBD Account are-
     
    • No requirement of maintaining a minimum average balance.
    • Facility of ATM card or ATM cum Debit card.
    • No charges for non-operation/ activation of inoperative ‘BSBDA’
     
    An academic study by Prof Dr Ashish Das, from Department of Mathematics at Indian Institute of Technology Bombay (IITB), has found that banks are quietly converting a no-fee basic savings bank deposit account (BSBDA) to a fee-based regular account with high minimum balance requirements or charging a fee, the moment such customer carries out fifth digital payment transaction in a month. In such scenario, the account remains converted as regular saving account making the customer liable to pay for several services besides keeping minimum balance amount in her account all the time.  
     
    According to the study, while India is working hard to bring about ease in digital transactions, State Bank of India (SBI) has debarred its 13 crore BSBDAs to carryout debit transacts more than four times in a month, even if it constitutes only digital transactions. Given that volumes of such accounts have been opened (under PMJDY) with an intention of financially including the excluded, such a scenario lacks the desired spirit of digital financial inclusion.
     
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    Public Sector Banks: How Will the Looting Ever Stop?
    Last week a consortium of Reliance Industries Ltd (RIL) and JM Financial Asset Reconstruction Co (ARC) succeeded in their bid for Alok Industries Ltd. This may appear as a great success of a bad loan resolution attempt but it is in fact a sad day in the history of Indian banking. The outstanding exposure of the banking system to Alok is a whopping Rs29,500 crore. Here is RIL-JMF ARC placing a lone bid for less than Rs5,000 crore. Initially it was rejected as it was noticed by the Committee of Creditors (CoC) as too low a bid and hence it chose to liquidate the company and recover their dues. The CoC had then called the consortium and had asked them to improve their bids. Smartly, the bid was improved by a token Rs100 crore and the final bid was placed at Rs5,050 crore, just a tad above Rs5,000 crore.
     
    Pat came an amendment to IBC regulatory framework that if CoC gets at least 66% in favour of a proposal instead of the present 75% levels, then the bid can be considered as acceptable and the proposal can be accepted. RIL consortium worked overtime to convince all the lenders. They had finally succeeded in persuading 72% of the lenders and could thereby breach the amended threshold limit of 66%. Wow! The consortium of banks are indeed very happy to announce that they are willing to take a nominal 83% haircut and offer on a platter a company in which about Rs29,500 crore were sunk by the banks (perhaps taking turns to pump in the money) against which they are getting a paltry about Rs5,000 crore.
     
    Still they feel they have done a great thing by recovering at least 17% of the overall dues.
     
    On the same day, another news headline is that the Indian Bank’s Association (IBA) is taking up the mantle and fighting for the top management of the banks. In their opinion, the investigative agencies of the government have been harassing them on ‘frivolous charges’ and hence the association is contemplating buying insurance to ensure indemnity against such ‘frivolous charges’ and protect the bankers against indiscriminate.  What a strange observation! 
     
    Banks have queued up in front of Alok Industries (almost all the public sector banks (PSBs) except Axis Bank) and have lent them left, right and centre. Their project assessment skills have been disastrous. Given that these banks have collectively chosen to take 84% haircut, it reflects their collective inefficiency.
     
    Where is the accountability of bankers and bank officers for not monitoring the account, reckless lending, and evergreening the exposure. If they can cover themselves under the garb of ‘adequately provided for’, what else is their job?
     
    The liquidation value for Alok Industries is about Rs4,200 crore. If they know that the bids from private parties will come at around the liquidation value, why in the first place did they publicly announce the liquidation value? It looks like the framework is made with the sole intention of helping these promoters to put the bid as close to the liquidation value as possible, without proper application of the mind!. Banks here work overtime to let public money get wasted. Sometime back, the banks were shouting themselves hoarse that the lone bid was too low and was close to the liquidation value. Why would one take such a massive haircut and accommodate these proposals, was their query. Now there is a complete U-turn.
     
    In the past, banks have taken possession of the properties of Small and Medium Enterprises (SMEs) and have liquidated them. Why not in this case? The transaction has left a good Rs24,000 crore hole through the banks, which is nothing but public money. How is this going to be accounted for? Who will be held liable? If a bank again indulges in reckless fresh lending and not monitoring the deployment proceeds, who shall be responsible? The malaise lies somewhere else:
     
    a. The bank senior management positions are filled by the Public Enterprises Selection Board (PESB), which simply reshuffles PSB general managers. No tangible new knowledge gets added. It all depends upon how much liaison has been done in North Block to get coveted assignments.
     
    b. Nobody has worked on honing up the assessment skills and post disbursement follow-ups and appropriate timely corrective actions. When new unforeseen problems occur, they do not think out-of-the-box. After all, they had all along been churning manpower from one PSB to another and vice versa. Hence, no creativity is happening.
     
    c. Strangely, the government as the biggest shareholder is shying away from their dominant position. Most bankers escape and some get caught (it all depends upon the blessings of North Block and your leanings with the extant forces). The government nominees have no deeper idea and are simply acting as rubber stamps without actively contributing.
     
    d.  Given that the bad loan levels are so high till date, the government also does not bother to get lateral talent from the private sector. 
     
    The middle level managers have to be adequately trained on project assessment skills and monitoring skills. Today, every bank is looking for a lead banker to take an initiative, who may follow him/her like a herd, so that at the first sight of trouble, any participating banker may report it to their lead banker for suitable corrective action. Nominee directors should be placed for dealing with cases where exposure limits are beyond a threshold and these directors should be held accountable for taking care of the repayment of debt obligations or should find corrective measures and implement them.
     
    The government directors should be experienced retired bankers and should not be career bureaucrats, who have no clue about banking challenges and eventually have little to contribute. Unless these maladies are removed, we may continue to see more bad loans. Simple merger of banks will not do wonders unless fundamental changes are brought in. Otherwise the loot of public money will continue. 
     
    (The writer is the Director of New Horizon Institute of Management Studies, Navi Mumbai)
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    COMMENTS

    SUBHASH CHATTERJEE

    1 year ago

    So true Mr Jayaraman.But equally true is involvement of the Bankers too.If all the Bankers decide that no such lending shall be allowed then i am sure a large number of bad loans shall get reduced.

    Ashok Senniappan

    1 year ago

    Bankers are ready for Hair cut of 83% OMG.Let the bank officials make good the remaining from their own asset.

    Ashok Senniappan

    1 year ago

    Instead of Valuation of the asset why not "Replacement Theory Cost " be adopted as poularised by Late Sri Harshad Mehatha ?So that bankers can recover substantial amount.

    Mahesh S Bhatt

    1 year ago

    We left D H Ambani now why crib for larger bites.Mistake if not cleared immediately repeats till it destroys you Corruption is legal/Laws are sham Bureaucracy is tradeable/Justice is a Political whore Mahesh Bhatt Kirticorp

    Rangaraj

    1 year ago

    https://mises.org/wire/entrepreneurial-nature-intrinsic-value

    Is the author against privatzation? Highest bidder wins. There is no intrinsic value to anything. Best is free global competition for stressed "assets".

    REPLY

    Rangaraj

    In Reply to Rangaraj 1 year ago

    Valuation is SUBJECTIVE as it originated in brain(Mieses)

    Rangaraj

    1 year ago

    Cronyism is behind Socialism. After all PSU banks were born of Nationalization - armed robbery by state. PSU banks are acting along their DNA. Bakasuras.

    Deepak Narain

    1 year ago

    The whole set up is rotten. No honesty, no integrity, little skills and little accountability. We need a strong, stern and highly capable and ruthless dictator (like Mao) for 10 years. Western kind of democracy does not suit us nor we suit it. The country is going to dogs!
    Western kind of democracy does not suit us nor we suit it. The country is going to dogs! Worse lies in the womb of future. After next Lok Sabha elections in 2019, BJP will not get clear majority. There will be a coalition government of corruption and compromises. God save our country!
    See what we had expected 4 years back and what we got!

    REPLY

    SUBHASH CHATTERJEE

    In Reply to Deepak Narain 1 year ago

    Deepak ji,our country too would survive all this corruption and compromise and come out a better and stronger.We have reached the Nadir so Zenith cannot remain behind for long.It is we ,who have allowed this to happen and it would be we only how could put things in order but the problem is we all are shielding ourselves behind our own personal needs thinking that it something hits us,it remains somebody else's problem. But once we see beyond our own self and that would have sooner or later,things would definitely change for the better.

    Rangaraj

    In Reply to Deepak Narain 1 year ago

    Be careful on what you wish for. Formation of PSU banks was by armed robbery by state. Now you are asking for Mass murder Mao style. Excellent taste in death wish

    DR SATI PRASAD SINHA

    1 year ago

    Still people believe money supposedly wasted on anti poverty measures should have been handed over to these looter industrialists and then every one will become rich.

    Vijay Pal Singh Panjatta

    1 year ago

    Bye the people, far the people, off the people .

    REPLY

    Rangaraj

    In Reply to Vijay Pal Singh Panjatta 1 year ago

    Indian state and political parties have emancipated themselves from democracy as it is the vote banks which vote (vote banks are formed by reservation policy as STABLE vote banks are formed at voters expense).
    India is an Ochlocracy,mob rule. Any doubt? Where else would you find bandhs where free movement of Individuals is taken away by mobs.

    suneel kumar gupta

    1 year ago

    I blame fully to our judiciary. No lower level person can challenge his superiors for wrong decisions or intent. They harass him and our courts take exceptionally high time in deciding. So who will dare to bell the cat and face consequences.

    REPLY

    Rangaraj

    In Reply to suneel kumar gupta 1 year ago

    It's Parliament, which is formed by Ochlocracy.See reply to Panjatta

    Pradip Joshi

    1 year ago

    I'm sure in China,the blame would be apportioned without delay,on specific persons... And perpetrators summerily executed, yes to death, in public knowledge.
    In India intelligentsia will cry foul even if managers of defaulting banks are photographed with 84% haircut, and published in news papers.
    We're civilised where looters like chanda kochar seat home and savor booty.

    REPLY

    Rangaraj

    In Reply to Pradip Joshi 1 year ago

    You want absolute power to state. How about some power to people by free gun laws.

    Ochlocracy (mob rule) is formed by crushing the Individual, the opposite of mob. Free gun laws empowers the Individual the opposite of the mob. USA has prospered BECAUSE of free gun laww

    Gopalakrishnan T V

    1 year ago

    It is very easy to stop the looting of public sector banks. Firstly make the RBI accountable and independent. It should be made answerable to public and parliament for all its duties and responsibilities. Secondly make the depositors and borrowers understand that what ever banks give as loans belong to depositors and all stake holders of the economy and banks cannot fritter away the funds to select borrowers who want only to loot and not to contribute to the economy. Thirdly keep away the bureaucrats from banks and RBI allow them to function professionally and deliver to the economy in a tangible manner.Fourthly equip the human resourcesof both banks and RBI with adequate knowledge, skills and human touch to handle the most sensitive commodity ie money with which they do business. The banks and RBI have to appreciate the importance of Customers and deliver the service to them in letter and spirit by avoiding high sounding jargons. Fifthly, make the public aware of the concepts of financial literacy and the role of banks and RBI in the economy in enhancing the economic prospirity of the country and welfare of the people.

    REPLY

    Carlos De Souza

    In Reply to Gopalakrishnan T V 1 year ago

    You are assuming that the people in power are honest and have the interest of the country at heart. Wrong assumption, Saar.

    B. Yerram Raju

    1 year ago

    SIDBI refused a haircut of 25percent for a small manufacturing enterprise proprietrix suffering from cancer for an year because she is having the own dwelling house offered as collateral has a value twice the outstanding amount of which 60 percent is interest and penalty.

    vj

    1 year ago

    This is organised loot and legalized plunder of public money!!!

    Sanjeev Singhal

    1 year ago

    This is not surprising. RIL is a shrewd player and has taken advantage of the circumstances. If the liquidation value of an asset is Rs x - estimated Rs 4200 Cr in this case, how can one expect an investor to pay a significantly higher value for the asset they are bidding for. I am to sure RIL can be faulted for this. Yes the Banks could have been shrewder too by prevailing upon RIL and JM Financial to put a higher amount of bid, if they had done their homework in assessing the future earning potential of the asset and asking RIL to put on the table the NPV of the excess than the normally expected returns..

    That owners of Alok Industries have looted is a no brainer. That the Bank officials have lent Rs 28000 Cr to a company that had a net worth of around Rs 3000 Cr and a peek sales of Rs 22000 Cr between 2010 and 2017, is very surprising. If Rs 16000 Crs of tangible assets that were built not to long back can fetch only Rs 4200 Cr, there is something seriously wrong with how the assessment was done.

    These officials who are trying to claim immunity must not be let off. They were enjoying pecuniary and other benefits from the the company for releasing them money far in excess of what the company deserved. And now when accountably is being demanded, they are seeking immunity - bloody grasshoppers and looters.

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