Lenders to Mandhana Industries have moved the bankruptcy court to cancel US-based Formation Textiles’ approved proposal to acquire the local textile and apparel maker, as it failed to meet the terms of the pact as per the agreed upon timeline, two people aware of the development said.
The National Company Law Tribunal had approved Formation’s proposal in November last year. The US company had made a total offer of Rs 537 crore, of which banks were to get Rs 480 crore. It was required to pay Rs 175 crore to lenders within 30 days of the effective deal date and the remaining Rs 305 crore over a period of six years.
It was also required to infuse Rs 226 crore in the local company through a mix of equity capital and borrowings, as mentioned in an NCLT Mumbai order seen by ET.
“The company has not paid up the requisite (initial) amount and the banks have filed an application to cancel Formation’s plan,” said one person.
Mandhana didn’t respond to an email seeking comment till press time Wednesday. The company’s resolution professional, Charu Desai, could not be reached for comment.
According to a February stock exchange notification by Mandhana, Formation had taken ownership of the assets from January 31 this year.
This is the fourth instance of a foreign company failing to pay up for an asset it has acquired under the bankruptcy law. Earlier, UK-based Liberty House as well as Deccan Value Investors and Ingen Capital of the US have acted in a similar fashion by not disbursing the requisite amount for the assets they had successfully bid for — Amtek Auto, Metalyst Forgings and Orchid Pharma, respectively.
Mandhana Industries owes Rs 1,180 crore to lenders. Formation’s promoter Piyush Viradia has appointed himself as the chairman of Mandhana, as per the company’s website.
Source: Economic Times