The lenders of consumer goods-to-oil firm Videocon Industries Ltd have decided to wait to get a better bid for the company before taking a final decision on liquidation.
The Committee of the Creditors of the company, which met here on Friday, was of the opinion that the ongoing Covid-19 pandemic has resulted in few bidders backing out from bidding for the company. If the company is sent for liquidation, the lenders will end up taking a huge haircut on their exposure. But as the economy picks up pace, lenders are of the opinion that the bidders will come back to the table.
At the time of sending the company to the National Company Law Tribunal (NCLT) for debt resolution, the company had claimed dues worth Rs 59,451 crore. Of this, Rs 57,443 crore of claims were admitted, as on November 2018.
SBI had notched up highest exposure in the company with Rs 11,175 crore of claims made against the company.
SBI was followed by IDBI Bank with claims of Rs 9561 crore and Central Bank of India with claims of Rs 5,066 crore.
In the last CoC meeting, the lenders discussed the option of sending the company to liquidation as bidders were backing out. But there is a thinking among lenders that with economic activity picking up, it may get good offers in the next few weeks.
Interestingly, soon after the banks said they will discuss sending Videocon for liquidation, the promoters of Videocon Industries had appealed to the banks to postpone any further action on the company's bankruptcy proceedings till Corona pandemic is over so that the company can get better offers.
By taking any hasty steps at the time of pandemic, it will just bring down the valuation of the company which has several assets worth billions across India and overseas, Videocon’s promoter had told banks in a written communication.
Some of the resolution plans that have been submitted to revive the Videocon group companies was not even being opened, they had said asking the lenders not to undervalue the company.
The promoters said the liquidation of the Videocon group companies would not only cause grave harm and prejudice to its stakeholders, whether they be financial creditors, operational creditors, or workmen/employees, but it will derail the entire insolvency process. Even before the decision to liquidate the group companies is taken, the CoC must open each resolution plans which have been received are at least opened and considered, the promoters said.
The promoters also reminded banks, as per their earlier debt resolution proposal, the banks will be able to recover upto Rs 27,500 crore dues (as on Nov 2017) and was even agreed by the Joint Lenders Forum in November 2017 after the forensic auditors gave a clean chit to the company. But the Reserve Bank of India then led by Urjit Patel decided to send the company to the National Company Law Tribunal (NCLT) for debt resolution in December 2017.