Banks reject lone bid for Jyoti Structures; may go for liquidation or rebid

A State Bank of India (SBI)-led consortium has rejected the single bid for Jyoti Structures from a group of high net worth investors, including Netmagic Solutions managing Director and Chief Executive Officer Sharad Sanghi, Kedaara Capital Advisors Managing Partner Manish Kejriwal and Reliance Capital’s former chief investment strategist Madhu Kela, as the bid sought a 80 per cent haircut from banks. 

Jyoti Structures failed to repay its debt worth Rs 70 billion and was in the Reserve Bank of India’s (RBI’s) first list of a dozen companies that were sent for debt resolution under the Insolvency and Bankruptcy Code (IBC) 2016.

“The resolution professional has received a communication from a few banks that on account of certain reason, they are revisiting and considering their decisions in respect of the resolutions put to vote. The resolution professional is awaiting communication from them in this regard,” the resolution professional for Jyoti Structures said in a statement to the stock exchanges on Wednesday.

The company would now go for either liquidation or a rebid, a lender said. According to the IBC, a solution has to be reached by March 31. 

The upfront money offered by the group of high net worth investors was also not very high, bankers said. The bidders had promised to invest Rs 1.5 billion in the company. 

Sanghi could not comment as he was travelling overseas.

The company, which supplies power equipment such as towers to Powergrid and NTPC, did not oppose the action by banks in the National Company Law Tribunal (NCLT) earlier, but said it had an offer on the table from a strategic investor. The resolution professional was appointed last July. In its annual report for 2016, the company said its restructuring package planned in 2015 failed because banks did not release enhanced working capital facilities. 

With this, the company was unable to adhere to milestones stipulated in the restructuring package and lenders had to invoke the strategic debt restructuring (SDR) scheme according to RBI guidelines. Since then, lenders were busy restructuring the company’s debt and evaluating the investment proposal submitted by a strategic investor outside the SDR, the firm informed shareholders last year. But none of the plans worked. The firm reported sales of Rs 8.7 billion and losses of Rs 14.82 billion in 2016-17.