NCLT Extends Insolvency Resolution Process for Srei Infra till 5th January
Moneylife Digital Team 11 November 2022
The national company law tribunal (NCLT) has extended the time till 5th January next year for completion of insolvency resolution process for Srei Infrastructure Finance. Total of three participants have evinced interest in the buyout process.
 
"National Company Law Tribunal, Kolkata bench has extended the time of completion of Corporate Insolvency Resolution Process (CIRP) till 5th January 2023 with respect to the ongoing CIRP of the company," Srei said in a BSE filing.
 
In October 2021, the Reserve Bank of India (RBI) took over the management of the Kolkata-based non-banking housing finance company due to its deteriorating financial conditions and governance issues. Following this, the company came under CIRP. RBI and Srei are the litigant parties in the matter.
 
As per an NCLT order dated 31 October 2022, the Srei administrator had sought more time till January 2023 for completion of CIRP.
 
Administrator Rajnish Sharma had earlier set a deadline of 15th October for accepting resolution options after lenders reopened the sale process of Srei Equipment Finance and Srei Infrastructure Finance. However, in mid-October, this deadline was extended by a month to 15th November. This was in response to demands from Prudent ARC, Edelweiss Alternative Asset Advisors, and AM Mining India, which is supported by ArcelorMittal. Last month, the financial creditors to the the twin Srei companies, allowed a late stage entry to ArcelorMittal, so that it can submit a bid. The three prospective bidders had submitted separate expressions of interest but requested additional time to complete their due diligence.
 
ArcelorMittal's unexpected interest in the twin Srei entities is related to its ongoing conflict with Srei Infrastructure Finance regarding the construction of the Odisha Slurry Pipeline (OSPIL). Under the Insolvency and Bankruptcy Code (IBC), the 253-km pipeline transports raw materials to the Essar Steel pellet facility which ArcelorMittal Nippon Steel India has since bought.
 
Objecting to the distribution of the sale profits of OSPIL and alleging discrimination against the same class of creditors, Srei Infrastructure Finance had filed a petition with the Supreme Court against Arcelor Mittal.
 
Since RBI permitted asset reconstruction companies (ARCs) with Rs1,000 crore in net owned funds to compete for enterprises facing insolvency, Edelweiss also appeared interested in bidding for Srei. 
 
While Prudent ARC has shown interest again, it may not qualify to bid for the assets, since it does not have Rs1,000 crore in net-owned funds.
 
After the parameters of the request for proposal (RFP) were changed, lenders resumed the sale process of the financiers with headquarters in Kolkata. Earnest money deposits (EMD) were decreased by lenders from Rs150 crore to Rs50 crore, and the performance bank guarantee was dropped from Rs500 crore to a minimum of Rs300 crore.
 
According to the amended RFP, if RBI does not approve the winning bidder, the Rs50 crore EMD will be forfeited.
 
Apart from these, a consortium consisting of Varde Partners and Arena Investors, and another consortium led by Shon Randhawa are also said to be in the race for the assets.
 
The RFP was changed to resolve a dispute between lenders and the joint bidder, Arena Investors in collaboration with Varde Partners, about the submission of an unconditional EMD. The two had provided conditional EMDs, which lenders did not accept.
 
The bidding process for Srei Infrastructure Finance Ltd. and Srei Equipment Finance Ltd. has seen consistent delays, partly due to bidders seeking more time to submit formal bids. Now, with late stage entries, creditors are expecting further delays.
 
A year ago, the twin Srei firms started the corporate insolvency process. As per the Srei group website, 44 financial creditors have consolidated claims worth Rs32,750 crore against the two companies, as of August.
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