Insolvency process: MCA orders SFIO probe into Castex Technology affairs

Castex Tech started its resolution process in December 2017 with a debt of Rs 6,000 crore

The Ministry of Corporate Affairs (MCA) has ordered the Serious Fraud Investigation Office (SFIO) to look into the affairs of Castex Technology, a subsidiary of automotive component maker Amtek Auto, currently undergoing a corporate insolvency resolution process.

A senior government official told Business Standard the investigation had been ordered on the basis of the findings of an audit report of Castex Technology during the resolution process. The details of the report could not be accessed. SFIO is in the process of constituting a team to start the probe into the matter.

Manufacturer of iron cast automotive components in India, Castex Technology started its resolution process in December 2017 with a debt of Rs 6,000 crore.

State Bank of India, the lead bank with a total exposure of Rs 1,191 crore towards Castex, had told the tribunal it had tried to revive the company by putting in place a corrective action plan in March 2016. The National Company Law Tribunal (NCLT), while admitting Castex to insolvency, had said even after being granted sufficient time, the corporate debtor (Castex) had not replied or objected to the notice issued by the lender.

According to the disclosures made by the company, declared Deccan Value Investors as the preferred bidder. The resolution process of the company was delayed as potential bidders wanted to submit a plan for Amtek Auto and Castex together.

Amtek Auto was among the top 12 non-performing assets (NPAs) referred by the Reserve Bank of India for insolvency resolution under the Insolvency and Bankruptcy Code.

Granting more time for the resolution, the appellate tribunal in its order had noted: “It is stated that Amtek Auto is the holding company of the present corporate debtor (Castex) and the prospective resolution applicants want to bid for both the companies as both the companies are undergoing the CIRP albeit, separately.”

A statutory audit report of Castex technology by Raj Gupta & Co said: “The company has been continuously making losses, consequently its net worth is negative and the firm’s total liabilities exceeded its total assets. This indicates the existence of material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern.”

For 2018-19, the annual report mentioned that Castex Technology earned revenue of Rs 460.7 crore and made a net loss of Rs 749.4 crore.

The firm’s product portfolio consists of a range of components for two and three wheelers, cars, tractors, light and heavy commercial vehicles and stationary engines.