Lenders keep Videocon, Jaypee out of insolvency process

Lenders send most companies from RBI's second list to NCLT

Lenders have decided to keep Videocon Industries, and Jaiprakash Associates out of the insolvency process as these companies are in advanced stage of debt resolution. 

A senior official of a public sector bank said Videocon Industries was not taken to the NCLT because it was close to the resolution of its  Rs 21,500-crore debt and because it had sold its Kenstar brand and corporate headquarters to repay loans. As per Videocon officials, its debt worth Rs 23,000 crore is housed with its oil subsidiary - Videocon Hydrocarban which has not defaulted on its loans. 

Videocon was among the 28 companies which were in the Reserve Bank of India's second list of defaulters and lenders were asked by the regulator to resolve these cases by Friday.

According to a top official of a public sector bank, Jaiprakash Associates was not sent to the NCLT as well under the Insolvency and Bankruptcy Code, 2016. Jaiprakash Associates has debt of Rs 30,000 crore and has sold its cement units and power plants for  Rs 31,000 crore (including debt) in the last three years to reduce its debt. 
 

The Jaypee group’s real estate company, Jaiprakash Infratech, which was in the RBI's first list, is undergoing insolvency proceedings and has drawn interest from the JSW, Adani and Vedanta groups during its debt resolution.
 

A banker said Nagpur-based Jayaswal Neco Industries was also spared because it is close to repaying its loans. The company’s proposal to convert part of its debt to equity was recently recommended by the independent evaluation committee formed in accordance with RBI guidelines to the joint lenders’ forum. Soma Enterprises, with a loan of Rs 1900 crore, is also not in the IBC list for similar reasons.

Compared to an earlier list of large corporate loan defaulters referred by the Reserve Bank of India (RBI) for proceedings under the insolvency and bankruptcy code, the second list of 28 companies includes smaller power and steel units.
 

Banks will have to make 50 per cent provisions on loans to these companies during the current quarter.
 

“We have sent most of the companies to the NCLT, barring a few that are close to resolution,” State Bank of India Chairman Rajnish Kumar told Business Standard on Wednesday.  
 

The RBI has asked banks to refer all companies that have failed to repay their dues on time to the NCLT. Today’s list follows the RBI’s first list of 12 companies undergoing insolvency resolution. 

  

A total of 376 cases have been admitted by the NCLT in 2017, of which four have been resolved and liquidation orders have been issued to 14 others. The rest are pending resolution.  
 

In 167 cases, the process was initiated by operational creditors. Financial creditors have initiated 122 cases, according to a report by Motilal Oswal.

Getting a reprieve
Company	Debt (Rs crore)
Videocon Industries	47,550
Jaiprakash	30,000
Jayaswal Neko	3,850
Soma Enterprises	1,900

* Consolidated debt | Source: Motilal Oswal, RBI