Insolvency: Binani Industries questions cement arm's bidding process

Resolution professional has personal interests, says firm in NCLT filing

Binani Industries, the promoters of Binani Cement, has put a question mark on the insolvency process of the cement company by valuing it at Rs 173 billion (including mining rights of Rs 117 billion) against the bids of around Rs 63 billion received from Dalmia Bharat and Ultratech Cement.

In a filing at the National Company Law Tribunal, Kolkata, Binani Industries has also said the resolution professional appointed for the company, Vijaykumar Iyer, and Deloitte, have vested interests in undervaluing the company so that they can give their “favourite bidder” the company.

“It appears the valuation done by the resolution professional is absolutely wrong on account of valuers being misled by the RP, who has a personal interest in undervaluing the corporate debtor (Binani Cement),” Binani Industries said in its petition. Emails and text messages to Deloitte and Iyer did not elicit any response. Binani Industries said though it owned a 98 per cent stake in Binani Cement, it had not heard anything from the resolution professional and crucial documents were withheld from it.

The directors of Binani Industries were not invited to meetings of the Committee of Creditors and the resolution professional did not seek any help from them on the bidding process. Six bidders — Ultratech, Dalmia Bharat, Ramco, Heidelberg Cement, stockbroker Rakesh Jhunjhunwala, and JSW Cement — have shown an interest in Binani Cement.

The bidding process has entered the last stage with offers from all the six bidders in. The top bidder’s offer will be sent to the Committee of Creditors (CoC) for approval. The NCLT will take a final decision on the winner.

Binani Industries said the company defaulted in repaying a loan of Bank of Baroda following a Supreme Court judgment that reduced sales tax incentives for the company and led to a higher tax outgo.

“Binani Industries has demonstrated the significant value attributable to Binani Cement, considering its mining rights and reserves, stake-of-the-art plant, performance, and potential. It is apparent that the resolution professional has failed to appreciate this value or desires to favour a resolution applicant (bidder),” the company said, adding that the offers received by the bidder are far higher than the company’s liabilities but lower than the independent valuation. Binani Industries said under the Insolvency and Bankruptcy Code 2016, which provides for distributing assets in liquidation, the shareholders of the stressed asset had the right and interest over the assets of the company after payment to lenders.

In the case of Binani Cement, in which the value of its business exceeds its liabilities, it is the duty of the resolution professional and lenders to consult other stakeholders and look after their interests in the resolution plan, it said.

“This would mean consultations with Binani Industries but no such effort has been made by the resolution professional as yet.” Binani Industries said the liquidation value arrived at by the valuer was Rs 23 billion.