Lenders to Alok Industries Ltd took a haircut of 84% in approving Reliance Industries Ltd (RIL)-JM Financial Asset Reconstruction Company (ARC)’s resolution plan to take over the bankrupted textile company. However, in a statement, DT Franco, General Secretary of All India Bank Officers' Confederation (AIBOC) says, "The RIL-JM combine has offered just Rs5,050 crore for the acquisition of Alok Industries, which owes close to Rs30,000 crore to a consortium of banks and operational creditors. We wonder how the National Company Law Tribunal (NCLT) allowed only one bidder in this case. How Reliance Industries, which is the biggest borrower in the country, allowed to become a bidder? This requires a thorough probe."
AIBOC says as per the 2017 balance sheet, Alok Industries had tangible assets of Rs16,762.93 crore, while current assets were Rs14,459.18 crore. "If its total assets were Rs32,708.99 crore and total current liabilities were Rs21,717.59 crore, how in just one year, its value can become Rs5,050 crore?" the union asks.
Alok Industries was started in 1986 and is a ISO 9001:2000 certified textile manufacturing company. It has 250 stores in India under the brand name H&A. It also has 100% owned subsidiary in Czech Republic.
RIL-JM Financial ARC had emerged as the sole bidder for the Alok Industries in the first round of auction held in March 2018, but lenders baulked at accepting the resolution plan which required them to take 85% haircut. RIL-JM FARC later raised its offer price by Rs100 crore. But lenders again rejected the resolution plan. The resolution plan was finally approved with 72% of lenders voting in its favour.
The resolution has been facilitated with the assistance of the government by the amendment in the Insolvency and Bankruptcy Code (IBC) that requires the approval of only a minimum of 66% of lenders as against 75% earlier. It is quite clear that IBC has been amended with the only objective to allow the RIL-JM taking over Alok Industries and in the process the banks have to endure the haircut of 83%.
"At a time, when the banks are already struggling to cope up with the rise in non-performign assets (NPAs) and decline in their net profits, such a step on the part of the government to further weaken the banks is very unfortunate, " AIBOC says adding, "Our Confederation condemns such a pro-corporate and anti-public sector banks approach on the part of the government and RBI. In the name of cleaning up the balance sheet, now the banks are forced to allow 83% haircut and benefit the corporate and again when the net profits will come down, it will be the same bankers who are to be blamed for the same."
The bank officer's union had asked the government not to move ahead with the sale of Alok Industries. "AIBOC demands that the government does not move ahead with this plan of benefitting the RIL-JM Financial ARC and thereby destroying the Indian public sector banks. We further clarify that our Confederation has also been monitoring all these developments which will jeopardise the existence of the PSBs and we will not remain silent spectator to all these for an indefinite period of time," the union warned.