The Kolkata Bench of the National Company Law Tribunal (NCLT) on Friday admitted a petition to start an insolvency process against McNally Bharat Engineering Company Limited, the troubled engineering, procurement and construction (EPC) company of the Khaitan-owned Williamson Magor Group.
Sources in the group confirmed that the petition for insolvency had been admitted but indicated that options for resolution were still being looked at. The order was yet to be uploaded till late evening.
The petition for insolvency had been moved by Bank of India, the lead bank. Ankur Singhi, Senior Partner, S K Singhi & Co. LLP, advocate for Bank of India, said, the NCLT admitted the Bank of India petition today for commencement of CIRP (corporate insolvency resolution process) in McNally Bharat.
“Bank of India had moved a petition for CIRP against McNally Bharat in 2020. The resolution plans submitted by the company to the lenders during the pendency of the petition was rejected,” said Singhi.
A filing with the stock exchanges by McNally earlier in the month had mentioned that the total financial indebtedness of the listed entities including short-term and long-term debt, as on March 31, was Rs 2,067.49 crore.
McNally had been pursuing a resolution outside the Insolvency and Bankruptcy Code (IBC) framework for some time. According to the company’s notes to December quarter results, the lenders had done a techno economic viability (TEV) study of the resolution plan.
However, an NCLT order dated March 30, mentioned that the committee of lenders had communicated to the corporate debtor (McNally) that the resolution plan submitted by it to resolve the insolvency outside the IBC framework was not acceptable to the lenders.
Trying to save McNally had proved costly for the Khaitans. The group wanted to avoid default, so when a downturn in the EPC industry spiralled, loans and advances were made by group companies – Eveready Industries India, a market leader in dry cell battery and McLeod Russel India, the country’s largest bulk tea producer.
For McLeod, which worked its way out of NCLT last year after a settlement with a financial creditor, a resolution under RBI’s June 7, 2019 circular is in the works with bankers.
Support to McNally was also extended by pledging promoter shares in the two companies to borrow funds for McNally. As pledged shares were called in by borrowers, the Khaitan holding slipped in its crown jewels – Eveready and McLeod.
In Eveready, as of December, promoter holding stood at 4.84 per cent as of December. The Burmans – looking to take control of Eveready – are at 20.96 per cent. In McLeod, promoter holding as of March 2022, was at 6.25 per cent.