A swiss challenge auction will be planned by the lenders of Sintex Industries to avoid Liquidation

Lenders of  Sintex Industries  NSE -4.81 % Ltd may hold a Swiss challenge auction or inter-se bidding if resolution applicants of the bankrupt textile company do not improve their offers substantially, said two people aware about the matter.

The auction route will be undertaken mainly to get improved offers so as to prevent the company from going into liquidation since the offers from all four bidders are below the liquidation value, they said.

Reliance Industries- Assets Care & Reconstruction Enterprise (ACRE) team, a Welspun entity,  Himatsingka
NSE -4.20 % Ventures and  GHCL  NSE 8.50 % Ltd have submitted resolution plans last month.

In a Swiss auction, the highest bidder will have the right to match a counteroffer received by the RP. Under the inter-se bidding process, each party gets a chance to increase its offer in every successive round until the highest bidder emerges.

ET reported on January 11 that the resolution professional, Pinakin Shah, who received the highest bid from Reliance -Acre team, had asked bidders to submit improved unconditional offers. The four resolution applicants are yet to submit a revised resolution plan to the RP, the people said.

As per the plan presently submitted to the RP, the Reliance Industries-ACRE team has offered Rs 2363 crore which includes Rs 2280 crore to financial creditors and the remaining to trade creditors and employees. In addition to this, they also offer 10% equity to the financial creditors and Rs 500 crore for working capital requirements.

ACRE is an asset reconstruction company backed by Ares SSG Capital.

Welspun’s Easygo Textile offered Rs 2300 crore to financial creditors, of which Rs 2200 crore is for financial creditors and the remaining is for trade creditors and employees.

The resolution plan from Himatsingka Ventures is Rs 2210 crore of which Rs 2200 crore is for financial creditors while GHCL plans are Rs 2040 crore of which Rs 2000 crore is for financial creditors, the same person said.

RIL, ACRE, Welspun Group, Himatsingka Ventures, GHCL did not respond to queries. The RP in an email response said that he cannot disclose confidential information.

There have been precedents of lenders resorting to Swiss challenge auctions for – Ruchi Soya and Dighi Port- to get improved offers. Both were companies undergoing corporate insolvency proceedings wherein lenders succeeded in getting improved offers.
“Only if the offers are not improved substantially, the lenders will consider the auction route instead of voting for liquidation,” one of the persons said. The RP has admitted Rs 7,534.6 crore of claims from 27 financial creditors.

Sintex Industries was admitted to the insolvency process by Invesco Asset Management after the company defaulted on a Rs 15.4 crore payment on principal and interest on non-convertible debentures.