Innoventive Industries faces liquidation as lenders reject resolution plans2 min read . Updated: 16 Oct 2017, 01:56 AM IST
Both the resolution proposals for Innoventive Industries are said to have sought deep haircuts on the outstanding loan amount
Mumbai: Innoventive Industries Ltd, a Pune-based steel products maker that is undergoing bankruptcy proceedings, faces liquidation after a committee of creditors (CoC) rejected two resolution plans, including one from the company’s promoters, two people directly aware of the development said. The decision to liquidate the company’s assets was taken in a meeting of the creditors on 12 October, one of the two people cited above said on condition of anonymity.
“The CoC will, however, meet once more to approve the plan to give the final stamp of approval" the first person said.
The liquidation value is expected to be in the range of Rs130-140 crore, said the second person, also requesting anonymity. Innoventive Industries is the first case filed under India’s Insolvency and Bankruptcy Code. ICICI Bank Ltd moved the National Company law Tribunal (NCLT) against the steel maker in December last year to initiate the corporate insolvency process.
The company, which had a debt of Rs955 crore at the end of September, has contested the petition. It said that it is not in default because the industries, law and labour departments of the Maharashtra government had notified a suspension of the firm’s liabilities from 22 July 2016 to 21 July 2017, Mint had reported in December.
Innoventive had first entered the corporate debt restructuring process in 2013, and a year later signed a master restructuring agreement with banks which was annulled later, Mint reported in December.
Innoventive Industries was founded by Chandu Chavan in 1991 as a manufacturer of precision tubes. It currently owns five manufacturing facilities around Pune and employs 680 people, according to the company website.
Apart from precision tubes, the company also manufactures products for automotive and oil and gas industry.
The company has a US subsidiary named Salem Steel NA, acquired in 2016, which produces specialty steel components for the US market.
NCLT had struck down the company’s plea and admitted the case in January and an interim resolution professional (IRP) from consulting firm EY was appointed for the company. The company’s promoters had also approached the Bombay high court and the Supreme Court but their pleas were rejected.
According to the first person cited above, both resolution plans had proposed deep haircuts on the outstanding amount. “In the first proposal, the promoters, along with a financial investor, had offered to infuse up to Rs180 crore in the company against a 75% haircut with an extended repayment schedule, while the second proposal was from an external bidder who proposed a one-time settlement against a haircut of 88%," said the first person.
“Lenders found both proposals untenable," the first person added. Requests for comment sent to ICICI Bank and EY did not elicit a response and a separate email sent to the company also remained unanswered at the time of publication.
The Reserve Bank of India (RBI) has directed banks to set aside 50% of the loan amount as likely losses for all NPA accounts referred to the NCLT under bankruptcy code. The banking regulator has also asked banks to set aside 100% provisioning in cases that fail to get resolved under insolvency proceedings and are forced into liquidation. However, government and commercial banks are seeking a relaxation of provisioning norms on accounts identified for bankruptcy proceedings to free up capital and boost credit growth. The finance ministry is in talks with the RBI on this issue, Mint reported in October.