Lenders to bankrupt textile company Alok Industries have approved a joint resolution plan submitted by Reliance Industries (RIL) and JM Financial Asset Reconstruction Company (JMF ARC). According to the plan, the combine will acquire Alok Industries for Rs 50.50 billion, of which the lenders will receive Rs 40 billion.
The corporate debtor owes banks Rs 295 billion, which means they are taking a haircut of more than 86 per cent.
Sources said voting by the members of the committee of creditors (CoC) began on Thursday night and as of Friday morning, around 72 per cent of the lenders voted in favour of the RIL-JM ARC resolution plan.
Business Standard sent an email to the resolution professional for Alok Industries, Ajay Joshi, but he declined to comment on the development.
This was the second round of voting to consider a bid by the combine. Their first offer of Rs 40.50 billion was rejected by the CoC in April, as only 70 per cent of the creditors had voted in its favour.
Prior to the recent amendment to the Insolvency and Bankruptcy Code (IBC), the rules required approval of a minimum 75 per cent lenders to have a resolution plan cleared. Now, the voting rule has been relaxed, and approval of only 66 per cent of the creditors is required.
Since the previous CoC vote had not met the threshold criteria and also because the 270-day deadline to resolve insolvency cases under the IBC had passed, the stressed firm was expected to be sent for liquidation.
Fearing that liquidation would lead to erosion of value and a loss of livelihood, the company’s employees and other operational creditors had filed an interlocutory petition in the National Company Law Tribunal (NCLT), Ahmedabad. The tribunal had directed the resolution professional to ask the CoC to reconsider the new resolution plan submitted by RIL-JMF ARC to avoid liquidation of the company.
The liquidation value of the company was pegged at Rs 42 billion. In a filing with stock exchanges, RIL said on Friday: “Pursuant to the order dated June 11 passed by the NCLT, Ahmedabad, the resolution plan was put to vote before the CoC of the company … the plan has received the assent of 72.19 per cent of the voting share of the CoC.”
Alok Industries is part of the Reserve Bank of India’s first list of 12 large corporate debtors that had to be referred by banks to the NCLT for insolvency proceedings.