NCLT questions Monnet Ispat's liquidation value of Rs 23.65 billion

The Mumbai Bench of the National Company Law Tribunal (NCLT) has questioned the basis on which the resolution professional (RP) arrived at the liquidation value of Rs 23.65 billion for Monnet Ispat. It is learnt that the plan submitted before the Bench, which had 98.97 per cent approval from lenders comprising the committee of creditors (CoC), takes into account the mining rights and future revenues of its mines.

The Bench sought to know whether the mining rights for one of its mines in Chhattisgarh, which Monnet won in 2015, was included for the valuation, and if it reflected in the liquidation value put forward.

A Coal Mining Development and Production Agreement (CMDPA) was signed between the company and the government in August 2015. In April 2017, the government issued a show-cause notice asking the company to renew its performance bank guarantee of Rs 3.29 billion it put forward in 2015, which expire in March 2017.

In its response to the government, Monnet said it was undergoing corporate insolvency proceedings and requested the government to bear with it until a resolution plan was put in place.

On December 30, the government issued a termination letter of the CMDPA, which was further upheld by the NCLT Mumbai Bench in January, when Monnet’s RP filed a petition against the government’s move.

The RP had appointed Knight Frank and RBSA Advisors as the valuation experts in the insolvency and bankruptcy case.  

In Wednesday’s hearing at the NCLT, Monnet’s counsel told the tribunal that it would provide clarity on this issue at the next hearing.

Monnet had outstanding loans of Rs 110 billion, of which secured financial creditors are owed Rs 40 billion, while unsecured financial creditors are owed Rs 70 billion. The lenders are expected to take a haircut of around 72 per cent as per the resolution plan submitted.

A consortium of JSW Steel and AION Investments have agreed to pay lenders of Monnet Rs 24.57 billion upfront, while the unsecured creditors would get equity shares and optionally convertible preference shares to the tune of around Rs 4 billion.