New Paradigms in DRT auction !
Debts Recovery Tribunal (DRT) Mumbai has finally rung the curtains down on Daewoo motors’ 5 year old saga of find a suitor for its Surjapur plant. In the process some new and interesting issues have cropped up on conversion of Non Performing Assets into Standard Assets. This offers new hope to certain other beleaguered big ticket NPAs.
The Daewoo Motors plant at Surjapur, with a capacity to manufacture 85,000 cars per annum under the brand names of Matiz, Cielo and Nexia shut shop in the year 2000 after its parent company in Korea folded up in the wake of the Asian currency crisis. World wide, the assets of Daewoo Motors were sold off However, in India, as usual, the auction process got mired up.
Two earlier attempts to auction the Daewoo’s unit failed. In the first auction, the DRT had set a reserve price of Rs 2,200 crore while in the second auction the reserve price was fixed at Rs 1,100 crore. Though a number of auto majors, including General Motors eyed the project and some even conducted due-diligence, but none bided as the reserve price was reportedly too high. As such, this time round, no reserve price was fixed. Asset Reconstruction Company of India (ARCIL ) was given the mandate to find a suitor.
This time around, some active bidding took place. The Bidders were M/s Cross links, Adzons, Suryamoney Finance, JBM Auto and Mokesh Infotech.
Crosslinks had put in a bid of Rs 765 crore comprising 35 per cent cash, 30 per cent equity and the rest in debt. Adzons put in a bid of Rs 600 crore bid without seeking any equity and disputing inclusion of equity as part of consideration in deciding the value of the plant. On the other hand JBM Auto offered to share with the lenders an upside on the stock up to 18% but without guaranteeing any assured return.
Cross links has been jointly promoted by B V R Subbu, who had set up Hyundai units in India, and Ajay Singh promoter of the Spicejet Airlines. It appears that the express aim of Cross Links was to take over the Daewoo plant, which is now to be integrated with the Mr. Subbu’s upcoming car plant at Medchal in Andhra Pradesh.
Cross Links will need to pay just Rs. 267.75 crores in cash. Rest every thing is in the form of equity and debt. Most Asset Reconstruction Companies now look at this format of reconstruction of stressed assets as a way out. This is a very healthy development and hold great future for other stressed assets. What is required is some great pragmatic planning and then some more deft planning.
But the fact that it took some five years to come to this stage in the run up to find a new bidder, in an economy that is booming by leaps and bounds, needs some introspection. It is time that RBI, the Ministry of Finance, the IBA and trade associations like FICCI and ASSOCHAM put their heads to gather to find ways to apply guillotine to such situations and not drag the auctions till the asset becomes a junk. It is in the interest of all the players, including the borrowers too.
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