NCLAT stays Twin Star’s takeover bid for Videocon

Billionaire Anil Agarwal-owned Twin Star Technologies’ plan to buy Videocon Industries Ltd has received a setback after the National Company Law Appellate Tribunal (NCLAT) put on hold the potential transaction following appeals by dissenting creditors unhappy with the contours of the deal.

A two-judge bench headed by officiating NCLAT chairman Ashok Iqbal Singh Cheema stayed the implementation of the resolution plan approved by the National Company Law Tribunal and adjourned the matter till 7 September; till then, Videocon will continue to be managed by the resolution professional.

Bank of Maharashtra and IFCI had filed a plea opposing the existing plan, arguing that the value realized through the sale to Twin Star Technologies is less than the liquidation value and also that a bulk of the payment will be made through non-convertible debentures (NCDs).

Twin Star Technologies has offered to pay ₹2,962 crore for all 13 group firms of Videocon against admitted claims of ₹64,838 crore. This comprises only 4.15% of the total outstanding claim and implies a 95.85% haircut for creditors.

The counsel for the dissenting creditors argued that Twin Star Technologies will not make any upfront cash payment and will instead pay the first instalment following the issuance of NCDs after 25 months. “It is argued that it is a matter of concern that the corporate debtors in the consolidated proceedings had cash of ₹200 crore and the SRA (successful resolution applicant) would bring in just ₹262 crore and from that also, the first payment of ₹200 crore will be brought in 25 months. Beyond ₹262 crore, the rest was being brought in only by way of NCDs to be paid in six years,” said NCLAT in its order on Monday.

The NCLT, in its 15 June order approving the sale of Videocon, expressed surprise that the value of Twin Star’s bid was close to the liquidation value, which was meant to be confidential. “Surprisingly, the resolution applicant also valued all the assets and liabilities of all the 13 companies and arrived at almost the same value of the registered valuers,” the NCLT said in its order.
The liquidation value and fair market value are kept confidential and informed to the committee of creditors (CoC) only at the time of finalizing the resolution plan, as per regulations.

Despite the existence of the confidentiality clause, a doubt arises as to whether the confidentiality clause was adhered to in this case, the tribunal noted. “We request IBBI to examine this issue in depth so as to ensure the confidentiality clause is followed scrupulously, without any compromise in letter and spirit by all concerned parties, entities connected in the CIRP,” the NCLT said.
The resolution plan includes all the 13 group companies of Videocon Industries. The resolution for Videocon Oil, Trend Electronics and Kail Ltd are also in process, and banks will separately recover dues from these companies.

Videocon, which has a presence across consumer durables, oil and gas and telecom among sectors, was part of the first dozen companies sent to the bankruptcy court after directions from the Reserve Bank of India in 2017.

In December that year, State Bank of India filed an insolvency petition against Videocon. Separate bankruptcy proceedings were also initiated against 15 Videocon group companies. The tribunal had excluded two entities—Kail and Trend Electronics—from the scope of consolidation and appointed Abhijit Guhathakurta as the resolution professional for the group insolvency process. Livemint