Bankruptcy proceedings filed against SEL Manufacturing
Mumbai: SEL Manufacturing Co. Ltd, a textiles maker, has become the first company in the second list of corporate defaulters identified by the Reserve Bank of India against which bankruptcy proceedings have been filed, according to two people aware of the matter.
State Bank of India, the lead bank, referred the case to Chandigarh National Company Law Tribunal last week, the people said on condition of anonymity. The bank named Grant Thornton as the interim resolution professional, and Shardul Amarchand Mangaldas & Co. as its legal counsel.
An email sent to SEL Manufacturing did not elicit any response. Spokespeople for Grant Thornton and Shardul Amarchand Mangaldas declined to comment.
“It is a policy of the bank not to comment upon individual accounts and its treatment,” said a spokesperson for SBI.
At the end of March 2017, SEL Manufacturing had a debt of Rs4,275 crore.
It is one of the 29 companies identified by the Reserve Bank of India to be resolved through any of its schemes before 13 December, failing which cases should be filed against these firms under IBC at the NCLT before 31 December. In September, foreign lenders including Standard Chartered bank and Singapore-based DBS Bank Ltd initiated bankruptcy proceedings against edible oil maker Ruchi Soya Industries Ltd, another defaulter in the second list.
“Expect more cases from the second list. It is more easily digestible given the quantum of exposure is going to be less for different stakeholders,” said Sitesh Mukherjee, partner at Trilegal.
Ludhiana-based SEL Manufacturing has been facing financial difficulties because of aggressive expansion undertaken over the years. High debt and a mismatch in cash flows forced the company to approach lenders for restructuring under the corporate debt restructuring (CDR) mechanism. “The credit facilities envisaged and sanctioned under CDR package were not fully released by the lenders which resulted in sub-optimum utilisation of manufacturing facilities and the company could not complete one of its spinning project where substantial amount was already incurred. All this has led to adverse financial performance and erosion in net worth of the company,” said the company in its FY17 annual report. Ever since the company has been in discussion with lenders for a second restructuring which includes including waiver of unpaid interest.
SEL’s referral to NCLT comes a time when 12 cases are currently undergoing bankruptcy proceedings.
On 13 June, RBI directed banks to refer 12 troubled companies with a combined debt of close to Rs2.5 trillion to the NCLT. Barring one, the remaining 11 cases including Essar Steel Ltd, Amtek Auto Ltd, Bhushan Power & Steel have been admitted by the tribunal.