• NCLAT stays Vedanta’s take over of Videocon

    The National Company Law Appellate Tribunal (NCLAT) has stayed Vedanta Group’s winning bid for debt laden Videocon Industries after an appeal by dissenting creditors who were unhappy with the value realised through the resolution.

    A two judge bench headed by officiating NCLAT chairman Ashok Iqbal Singh Cheema has stayed the implementation of the resolution plan and adjourned the matter to September 7 till which date the company will be continued to be managed by the resolution professional.

    Bank of Maharashtra and IFCI had filed a plea opposing the existing plan arguing that the value ascribed to the company was very close to the liquidation value and even a part of the payment to dissenting creditors was through non convertible debentures (NCDs) which is in contrast to the Supreme Court order in the Jaypee Infratech case which had set a precedent by directing that dissenting creditors should only be paid by cash.

    “This stay now means that the deal could be stuck for months as it will be caught up in the legal whirlwind of replies and counter replies. This NCLAT order is a result of the unease on the large haircut that the creditors had agreed to though it is fact that the best offer was chosen from what was available,” said a person involved in the process.

    In December over 94% of the creditors by value voted for Vendanta arm Twin Star Technologies as the preferred bidder. Vedanta’s offer of a little over Rs 3,000 crore was a haircut of more than 95% on admitted claims of Rs 61,770 crore. NCLT had approved the plan in June but had commented that Vedanta had paid “almost nothing” to take over the company, noting the huge haircut the lenders had taken.

    Vedanta’s offer includes NCDs of Rs 2700 cr and cash unfront of Rs 551 crore. It also includes some equity to financial creditors in the company.

    Videocon has 54 financial creditors with about 33 of them in the committee of creditors. State Bank of India with 19.15% vote is the largest financial creditor, followed by IDBI (16.63%) and Central Bank of India (8.69%). All these large financial creditors have voted for Twin Star.

    “We can only vote for offers in front of us. We decided on the bid based on the information available. We cannot help it in case the court has taken a different view,” said a banker involved in the process.

    Vedanta had also sweetened its offer by giving a corporate guarantee indicating its seriousness in completing the plan.

    The assets include Ravva Oil and Gas Fields in the Krishna Godavari Basin in which Vedanta can now become the single largest shareholder by consolidating its holding and taking over Videocon’s 25%. Vendanta arm Cairn already owns 22.5% in the field, while state-owned ONGC has 40%.

    “The fear now is that this resolution which was one of the few sucesses in a Covid year will be delayed beyond repair. One hopes that Vedanta is patient to complete this plan because if this offer is not completed getting a new one looks very difficult and banks stand to lose whatever little they have got,” said the first person cited above.

    Videocon’s 15 companies were taken to the National Company Law Tribunal (NCLT) one by one between June and September 2018. In August 2019, SBI took lead and petitioned the NCLT, which gave permission to consolidate 13 companies. Vedanta’s plan is for these 13 companies. Two other companies, its kitchen appliances division, KIAL Ltd and Trend Electornics are undergoing separate bankruptcy processes.

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