The Ahmedabad bench of the National Company Law Tribunal (NCLT) has admitted an insolvency petition against textile company Sintex Industries after it failed to pay more than Rs 7000 crore to a group of creditors led by Punjab National Bank (PNB).
Sintex is the largest debtor taken to the NCLT since the one-year moratorium on filing fresh cases ended in March. Lenders tried to complete a one-time settlement with Mumbai based Welspun India Group in order to avoid going to NCLT. However, the Welspun offer involved as much as a 74% haircut and a long payback period which discouraged lenders from taking the offer, three people familiar with the negotiations said.
“Welspun’s offer did not even go to the bank boards, it was rejected at the joint lenders forum itself because the offer was too low and involved an elongated three-year repayment period. The way things are we expect a delay at the NCLT but we were left with no option,” said a person involved in the negotiations.
Banks’ failure to close the deal with Welspun is yet another indicator of depressed valuations in stressed assets which have been hit hard due to the economic disruption caused by the Covid 19 pandemic.
Talks with the Balkrishan Goenka-controlled Welspun Group had continued till early this year as bankers preferred entering into an out of court agreement rather than going through a long drawn NCLT process. However, Welspun’s Rs 1800 crore final offer for the Rs 7000 crore debt could not cut ice with lenders.
Delhi-based PNB is the lead lender to Sintex Industries, which also has a twin Sintex Plastics Technology, a household brand name of water tanks in India. Both companies were separated in 2017.
Other lenders to the company are Bank of Baroda, Union Bank of India and Bank of India (BoI). PNB has the highest exposure to the company at more than Rs 1203 crore while BoI has a Rs 700 crore exposure and Union Bank has a Rs 350 crore exposure to the company.
In September last year PNB declared its exposure to Sintex Industries as fraud and provided Rs 215 crore. Banks have to set aside 100% of their loan expsoure in case of fraud either at one go or within four quarters.
Lenders have been trying to settle this debt for more than two years. In September 2019 ET had reported that banks were talking to three bidders namely Welspun, Rajinder Gupta owned Trident Group and Paul Oswal-controlled Vardhman Group to buy the company.
Welspun was the last interested party left in the race and had continued talks even after the pandemic had hit Indian shores.
