NCLT approves J K Papers' resolution plan for revival of Sirpur Paper Mills

National Company Law Tribunal (NCLT)'s Hyderabad bench on Thursday approved the resolution plan submitted by J K Papers Limited for the revival of Sirpur Paper Mills Limited's operations in Telangana. 

J K Paper's resolution plan involves payment of Rs 3.4 billion to the secured financial creditors and a payment of another Rs 310 million to the employees and operational creditors as against the total admitted claims of Rs 6.73 billion. 

In this the company has offered to make an up front cash payment of Rs 1.35 billion besides a payment of Rs 0.43 billion through buy back of equity shares and Rs 1.62 billion by way of preferential allotment of shares with 20 year maturity to the secured financial creditors.

According to the resolution plan, the new promoter would bring in a total funding of Rs 7.82 billion, including a settlement payout of Rs 3.71 billion, for the revival of Sirpur Mill.

Established in 1936 by the ruler of the then Hyderabad State, Sirpur Paper Mill was shut down in September 2014 after intermittently facing the closure owing to financial losses even as the Telangana government looked for a private sector player revive the mill  in to protect the jobs of workers and employees in the remote Kagajnagar town in Adilabad district. There were about 1,200 employees on the company rolls.

The NCLT had initiated the insolvency resolution process for Sirpur Paper Mills Limited in September 2017 based on a petition filed by an operational creditor. Out of the seven resolution applicants, who submitted their expressions of interest(EoI) in January 2018, only J K Paper filed a resolution plan in the following month.

On May 16 the Committee of Creditors (CoC) comprising of IDBI, SBI Central Bank, Andhra Bank and Syndicate Bank had approved a revised proposal of J K Paper with 80.66 per cent vote, according to Resolution Professional's counsel V K Sajith.

J K Paper, which had reported a consolidated revenue of Rs 28.77 billion in 2017-18, had taken interest in the revival of Sirpur Mill after Telangana government persuaded the company promoters to takeover the closed mill by offering various incentives. Under the revival package the government had offered 100 per cent gross GST reimbursement for 10 years, a capital subsidy of up to Rs 500 million among other things.