Chennai: Mauritius-based shareholder Aidqua Holdings has challenged the Company Law Board’s approval of a Rs 600 crore corporate debt restructuring (CDR) proposal for New Tirupur Area Development Corp. Ltd (NTADC).
Aidqua filed a case in the Madras high court opposing the debt package in mid-March.
NTADC was established as a public-private partnership venture for water and sanitation. It was to supply water and treat effluents from textile and dyeing units in Tirupur in Tamil Nadu.
The public limited company was established in February 1995 and promoted by Tamil Nadu Water Investment Co. Ltd as a special purpose vehicle promoted by the state government and Infrastructure Leasing and Financial Services Ltd (IL&FS).
Aidqua has argued that the debt recast falls under “general reserved matter” and is intended to protect the interest of lenders at the cost of the company and its constituent shareholders.
The Mauritius investor currently holds a 27.8% stake that will come down to about 14% if the debt recast goes through. It wants to stop the CDR exercise, which it says is based on incorrect and unascertained debts of the company. It also proposes to allot shares to lender-shareholders such as IL&FS, which will see its stake increasing to 14.23% from 11.68%.
NTADC chairperson Thangam Sankaranarayanan’s office said the official wouldn’t be able to comment as the case is in the court. IL&FS could not be reached for comments.
CLB approved the CDR package last month as the Tamil Nadu government had assured an investment of Rs 150 crore in the firm, besides purchasing the additional unutilized water.
NTADC faces a loss of around Rs 354 for every Rs 100 earned, indicating an erosion of capital base, according to the CLB order. The Tamil Nadu government has already advanced Rs 36 crore to service loans. The closure of dyeing units due to pollution and modernization of textile units has resulted in the lower consumption of water.
The CLB order said that since veto powers will be protected, Aidqua wouldn’t lose its right to oppose special resolutions even though its stake will drop.