Are you following the Go First airline case currently receiving plenty of airtime in the media?
On May 2, 2023, the Wadia group airline filed an application for voluntary insolvency resolution proceedings before the National Company Law Tribunal (NCLT) and suspended all its flights.
As I write this, Go First’s legal counsel has informed a bankruptcy court that the purpose of filing for voluntary insolvency is to revive the airlines. While the carrier has blamed “defective and failing engines” supplied by Pratt & Whitney for grounding about half its Airbus A320 fleet, the Airbus engine-maker has claimed that Go First did not pay its dues.
Banks have reportedly provided debt facilities of INR 4,500-5,000 crore, but declined to provide any further financial support, while the company has declared its financial liabilities to be worth over INR 6,500 crore.
If you aren’t keeping up with the proceedings, I suggest you do so, because this seems likely to become a textbook example of an insolvency resolution case.
Can you think of a few more such famous insolvency cases in India since the promulgation of the amended Insolvency and Bankruptcy Code (IBC) in 2016? I came up with this list of both ongoing and past cases:
Essar Steel
This is not just a landmark IBC case, but also an example of the largest returns – nearly 85 percent– realised by lenders on the company’s INR 49,000 crore debt.
Essar Steel was part of the first list of 12 companies identified by the Reserve Bank of India (RBI) to refer to NCLT for resolution. Brought before NCLT in August 2017, the case was finally resolved in November 2019 when European steel giant ArcelorMittal finally got hold of the asset following a Supreme Court judgement, giving Laxmi Mittal an entry into India.
Shashi and Ravi Ruia, the company’s former promoters, tried everything to get the asset back, from bidding via Numetal to making an INR 54,000 crore settlement offer. While the courts rejected all their attempts, ArcelorMittal revised its offer in the second round of bidding to Rs 42,000 crore.
Dewan Housing Finance Ltd
The DHFL story began in 2019 with allegations of fraud and financial mismanagement by promoters Kapil and Dheeraj Wadhawan. This went on to become a fierce battle between bidders Oaktree Capital and Piramal Capital & Housing Finance, even as the Wadhawans went to jail on money laundering charges.
The RBI referred the case to the NCLT for resolution in November 2019. In June 2021, the Piramal Group emerged as a successful bidder with an offer worth INR 37,250 crore after an NCLT go ahead.
At the time, DHFL owed a staggering INR 87,082 crore to creditors including banks, financial institutions, NCD and FD holders.
That means lenders took a haircut of 57 percent on the bankrupt financial services company’s debt, at least on paper. However, most lenders predicted a recovery of less than 43 percent after the distribution of funds.
SREI Group
In February 2023, the Kanoria family, promoters of the Kolkata-based SREI Group, submitted a new resolution plan under section 12A of the IBC with the SREI administrator, offering to pay off dues of around INR 32,000 crore to withdraw their companies from the insolvency process.
Incidentally, section 12A allows the management of corporate debtors to settle matters between creditors and withdraw cases under the Corporate Insolvency Resolution Process (CIRP).
According to PTI, the offer from the Kanorias was the highest with a net present value (NPV) of INR 7,000 crore, including upfront cash of INR 3,500 crore. The remaining debt will reportedly be paid through a combination of financial instruments such as cash, NCDs, OCDs, and equity over a period of five years.
The resolution plan will be reviewed to see if it qualifies under section 12A, and a decision will be taken by the Committee of Creditors.
As of now, two SREI companies – SREI Infrastructure Finance and SREI Equipment Finance – have received three bids. The state-backed NARCL offered a Net Present Value (NPV) bid of ₹5,555 crore, Authum Investment and Infrastructure’s bid INR 5,526 crore, while a consortium of Varde Partners and Arena Investors submitted a bid of around INR 4,680 crore.
Once again, I suggest you keep an eye on the proceedings!
Videocon Industries
The three-year resolution process of Videocon Industries and 12 other group companies ended with lenders taking a haircut of almost 96 percent, the biggest such instance so far. Creditors lost out on almost INR 62,000 crore after NCLT approved a bid for the ailing group by Vedanta Group’s Twin Star Technologies for INR 2,962 crore on June 8, 2021.
Bhushan Steel
Another landmark case from the RBI’s first batch of 12, the insolvency resolution of Bhushan Steel was completed in just 10 months flat, with NCLT admitting the company for resolution in July 2017 and Tata Steel’s bid receiving NCLT approval in May 2018.
The fastest resolution so far in an IBC case, the bidding war between Tata Steel and JSW Steel fetched lenders a 63 percent recovery, where Tata Steel bid INR 35,200 crore against Bhushan Steel’s debt of INR 56,051 crore.
Your part in the story
As of 2021, India saw the resolution of 348 IBC cases, with a total recovery of INR 2 lakh crore for banks.
Remember my earlier email about how much you can make as an insolvency professional? I suggest you reread it, and then imagine yourself as an IP in any of the cases I have mentioned.
Apply the calculations I talked about, and figure out not only how much money you would have made, but also the fame and prestige you would have earned within the industry.
Want to know how you can become part of such landmark insolvency resolution deals?
Want to become a go-to professional in all such cases?
Come to our FREE, LIVE, online bootcamp on ‘How to become an insolvency professional in India’,on May 6-7, 2023, from 6.00-9.00 pm IST both days.
No recordings will be made available, so I urge you not to miss even a second!
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