Where is the insolvency resolution process of Srei group companies headed?

The resolution process for two Srei group companies undergoing bankruptcy proceedings may be near completion. 

A consortium of alternative investment firm Varde Partners and Arena Investors has submitted a resolution plan for the two Srei companies, according to the Financial Express newspaper.

By when was the consortium required to submit its plan?

The administrator of the Srei companies, Rajneesh Sharma, had allowed the consortium time till midnight of Saturday to submit a financial bid compliant with the rules of request for resolution plan (RFRP) under the corporate insolvency resolution process.

According to the report, the administrator dismissed the allegations raised by the consortium about the challenge mechanism process for inviting fresh plans from eligible prospective resolution applicants. 

The administrator had earlier shot off a letter asserting that the revised plan submitted after the completion of the process was “non-compliant” because it did not follow the rules of the RFRP.

What is the background to the consortium’s involvement in the resolution process?

The consortium, which has been in the fray from the beginning of the corporate insolvency resolution process, had dropped out at the end of the second round of the challenge mechanism process. The consortium’s financial bid in terms of net present value (NPV) stood around Rs 4,680 crore, including Rs 3,250 crore of upfront cash.

After the challenge mechanism process ended, state-backed NARCL’s offer of Rs 5,555 crore in NPV terms, which includes upfront cash of Rs 3,180 crore, was found to be the highest. Authum Investment and Infrastructure’s bid of Rs 5,526 crore in NPV terms was adjudged the second-highest.

What were some of the allegations made by the consortium?

Alleging that the challenge mechanism process for inviting fresh plans from eligible resolution applicants was carried out at a “short notice”, the consortium on last Thursday submitted a revised bid, increasing the cash component to Rs 3,600 crore.  

When is the bid likely to be opened?

Varde-Arena’s plan, submitted on Saturday, will be opened on Monday. A lenders’ meet is also scheduled, the report, citing unnamed sources, said. 

Why was the challenger mechanism adopted in the first place?

According to the report, the CoC decided to adopt the challenge mechanism as in the revised plans submitted by the three bidders earlier, the upfront cash component had remained below Rs 3,000 crore. The creditors, thus, decided that Rs 3,000 crore would be considered as the minimum threshold value of the financial proposals towards the upfront cash payment for the eligible resolution applicants for participating in the challenge process. 

How big are the total submitted claims of the financial creditors? Who exactly are these creditors?

The total admitted claims of the financial creditors of the two NBFCs stood at Rs 32,750.22 crore. State Bank of India, Punjab National Bank, Axis Bank, HDFC Bank, Union Bank of India, Canara Bank, IDBI Bank, UCO Bank and Indian Overseas Bank, among others, are the financial creditors.