Under the hammer

Vijay C Roy in Chandigarh

Around 30 companies based out of the region — namely Haryana, Chandigarh, Punjab, Himachal Pradesh and Jammu & Kashmir — are undergoing insolvency proceedings filed by banks before the National Company Law Tribunal (NCLT), Chandigarh since the enactment of Insolvency and Bankruptcy Code (IBC) last year. According to sources, these include SEL Manufacturing, James Hospitality, Arcee Ispat Udyog Ltd, Mor Farms (P) Ltd and Castex Technologies. The cases have been filed by creditors such as Corporation Bank, State Bank of India and Punjab National Bank.

Under the IBC, once the case for insolvency is filed with the NCLT, the resolution professional takes over the management of the company and tries to resolve the issue. The liquidation process begins only when the resolution professional is not hopeful of reviving the company.

In March this year, New Delhi-based Amtek Auto Ltd became the first among the 12 large insolvency cases to be referred to the NCLT and the UK-based conglomerate Liberty House emerged the preferred bidder to acquire the auto components firm. Amtek Auto, which has a strong presence overseas, has forging, iron casting, aluminium and machining facilities in India. Last month, the Chandigarh Bench of NCLT approved Liberty House’s resolution plan to acquire Amtek Auto. Earlier, the SBI had moved the NCLT for bankruptcy proceedings against the bank, which was admitted by the Bench. The group was saddled with hefty losses, an unending list of creditors totalling around Rs 12,700 crore.

Its unfortunate fiasco began with the company’s scorching pace of global acquisitions between 2013 and 2015 and a mounting debt to fund them. The strategy misfired badly as the global auto market, especially in the developed regions, nosedived soon after. While its peers gained from the steady growth in India’s passenger vehicle sales to 30 lakh units over the last five years, Amtek’s fortunes tumbled. A string of overseas acquisitions left it under a pile of debt.

However, investor hope has been rekindled given that the $7 billion Liberty House group is part of the GFG Alliance, which is twice the size and has a global presence in energy, metals, engineered components for automobile and aerospace and other downstream products.

The other defaulter for whom banks approached NCLT was Bhushan Power and Steel Ltd. The company, which owes Rs 37,248 crore to a consortium of lenders led by Punjab National Bank, is sixth of the 12 large stressed accounts identified by the RBI last year for referral to the NCLT. The lenders led by PNB decided to refer it to NCLT’s Delhi Bench. BPSL, with a production capacity of 3.5 million tonne per annum, is a leading manufacturer of flat and long products.

Recently, JSW Steel submitted a resolution plan of Rs 197 billion (Rs 19,700 crore) to the Committee of Creditors of debt-laden BPSL. Besides JSW Steel, Tata Steel and Liberty House have also submitted bids in the past to acquire the firm.

In October last year, the country’s largest lender, SBI, started bankruptcy proceedings against Ludhiana-based textile player, SEL Manufacturing Company Ltd. SBI, which is the lead bank of the consortium, has filed the case with the NCLT, Chandigarh. According to sources, SEL owed over Rs 4,000 crore to around 17 nationalised banks as on March 2017.

The company had reported a net loss of Rs 219.07 crore in the quarter ended June 2017 as against a loss of Rs 186.51 crore during the quarter ended June 2016. The other identified accounts by RBI includes Alok Industries (Rs 22,075 crore), Monnet Ispat (Rs 12,115 crore), Era Infra (Rs 10,065.4 crore), Jaypee Infratech (Rs 9,635 crore), ABG Shipyard (Rs 6,953 crore) and Jyoti Structures (Rs 5,165 crore), according to industry data.