IBC process: Two fresh bids for Nagarjuna after NCLT rejects liquidation

Two fresh bids have been submitted after the insolvency process for Nagarjuna Oil Corporation (NOCL) ran into controversy. The firm’s committee of creditors (CoC) was recommending liquidation, but the Chennai Bench of the National Company Law Tribunal (NCLT) asked the lenders to examine resolution. 

Sources close to the resolution said: “The highest bid is Rs 14 billion but the upfront payment is less. The remaining payment is over a span of 10 years, which is why we are not interested.” The CoC had earlier rejected bids from Bharat Petroleum, Haldia Petrochemicals of Kolkata’s The Chatterjee Group and GP Global, citing the bids were below the liquidation value of Rs 14.5 billion. The lenders had fixed the liquidation value after getting reports from two registered valuers.

In November, however, a prospective bidder MB Holdings of Oman had written to the CoC, saying there were flaws in the valuation methodology adopted and that the liquidation value was high.

“The NCLT has repeatedly asked the lenders to look for ways to revive the project instead of opting for liquidation. By choosing liquidation, the lenders may not even realise Rs 1 billion, because nearly 2,000 acres of the total land bank of 2,500 acres will be taken back by SIPCOT (a Tamil Nadu government agency), and there may not be a ready buyer for NOCL’s second-hand equipment,” said a person close to the development. Resolution applicants are also concerned about the state of the machinery, which were bought 10 years ago, said the official.

Unlike other assets undergoing insolvency resolution, NOCL is not in operation and, hence, does not earn any revenue. A joint venture between Hyderabad's Nagarjuna Fertilizers & Chemicals and TIDCO of the Tamil Nadu government, the firm was carrying out a 6 million tonnes per annum petroleum and oil refinery project in Cuddalore, almost 200 kms south of Chennai, before being stalled for shortage of funds. The plant needs further investment of Rs 150 billion over three years by the successful bidder.