After months of deliberations on resolution plans and various cases in the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), Ferro Alloys Corp of India may finally end up being liquidated.
The Committee of Creditors (CoC) rejected all resolution plans, even after the Kolkata Bench of the tribunal gave it time beyond the stipulated 270 days.
According to sources, the liquidation value of Ferro Alloys is around Rs 3.5 billion. It has a 100 megwatt (MW) power plant that can be sold at Rs 4 billion, increasing the total liquidity value to Rs 7.5 billion.
Lenders, led by Rural Electric Corp (REC), have total outstanding dues of around Rs 8 billion, including interest.
The principal loan amount is Rs 5.10 billion. REC’s exposure accounts for 90 per cent of the total outstanding amount.
One of the unsuccessful bidders has, however, claimed that the liquidation value of Ferro Alloys, according to two different consultants, stands at Rs 3.55 billion and Rs 5.72 billion, respectively.
In case Ferro Alloys is liquidated and a piecemeal sale takes place, lenders have a much better chance to recover their dues with interest, instead of accepting a resolution plan where they can only recover their principal amount and have to forgo the interest component, according to the bidder quoted above.
Swiss firm IMR Metallurgical Resources, the highest bidder, had offered Rs 7.29 billion for a takeover, but did not wish to take control of either the mines or management of Ferro Alloys. The CoC termed it as a “partial bid” and rejected it.
A similar “partial bid” was also submitted by Indian Metals & Ferro Alloys, the second highest bidder, which alleged that Ferro Alloys’ resolution professional had changed the terms of the bid at the last moment. The CoC also rejected its proposal.
“The NCLAT, after hearing the case, reserved its order, but did not finalise the date. The NCLT is likely to pass judgment on this case on July 12,” Resolution Professional K G Somani said.
Ferro Alloys has four mines — two are operational, one is closed and another one has applied for renewal of lease.
Offers from Anik Industries, Synergy Steels, Krishnaping Alloy and Krishna Alloy were also rejected due to low quotations.
Asked why the CoC could not select the highest bidder, Somani said the bid from Balasore Alloys, one of the initial contenders, was rejected by the CoC, which alleged that the company was a wilful defaulter. Subsequently, Balasore Alloys moved the NCLT.
The tribunal, on March 8, after hearing its plea, allowed Balasore Alloys to bid, which resulted in the bidding window reopening for the third time in March this year.
“The CoC took a month to seek legal counsel to decide if Balasore Alloys’ bid could be accepted,” Somani said.
Founded in 1955, Ferro Alloys has a 45 Mega Volt Amp furnace with rights on four mines, and a 100 MW power plant.