While the committee of creditors (CoC) of Sintex Industries Ltd (Sintex)has approved the joint bid of Reliance Industries Ltd (RIL) and Assets Care & Reconstruction Enterprise (ACRE) to acquire the debt-ridden textiles company under the insolvency resolution process (IRP), dozens of shareholders have sent emails to the resolution professional (RP) against the proposed delisting of Sintex. Online brokerage Zerodha has also issued a warning to investors to refrain from buying shares of Sintex in the hope of earning a profit.
Sintex, in a regulatory filing Sunday, informed the exchanges that "As per resolution plan of RIL jointly with ACRE, it is proposed that existing share capital of the company shall be reduced to zero and the company will be delisted from the stock exchanges, BSE and National Stock Exchange (NSE)."
According to the company, the e-voting on approval of the resolution plan was concluded on 19 March 2022 and the resolution plan submitted by RIL-ACRE has been duly approved by 100% of CoC members under Section 30(4) of the Insolvency and Bankruptcy Code (IBC) as the successful resolution plan.
This, however, is subject to the approval of the National CompanyLaw Tribunal's (NCLT's) Ahmedabad bench.
Separately, Zerodha founder Nithin Kamat, in a tweet, warned investors against buying shares of Sintex just because it is at a 52-week low. He says, "It is concerning that we have a few customers still buying Sintex shares even after this nudge that the stock price will go to 0 and mandating a time-based one-time password (TOTP). There are so many who decide to buy just because a stock is at 52 week or all-time lows without caring about the reason."
Meanwhile, shareholders of Sintex have asked the RP for full disclosure about the proposed delisting plan. "... we are surprised to note that, so far, there has been no approval of the said resolution plan under section 31 of the IBC. Despite the above, you have made partial disclosure about proposed delisting in violation of the said SEBI guidelines without even disclosing the exit price justification; therefore, there has been a violation of the Securities and Exchange Board of India (SEBI) delisting guidelines," these shareholders say.
However, this is not the first time when shareholders of Sintex are sending emails in bulk to media. In January this year, a bunch of shareholders had demanded that since details of the bids have been leaked, it violates the principle of maintaining confidentiality during the entire resolution process.
As reported by Moneylife at that time
, most of these shareholders are clueless that the insolvency resolution process allows a successful bidder to decide the fate of existing equity. Most investors have also been lured into investing only recently, based on two well-known examples of Ruchi Soya and Alok Industries where existing shares were not extinguished, giving shareholders a big bonanza.
Those who take blind bets based on social-media wisdom rarely bother with even the cursory research that would have informed them of dozens of examples where existing shareholders lost out when equity was extinguished. So compelling is the fake narrative that millions of investors are buying shares of bankrupt companies as evident from the trading volumes of stocks that are being actively manipulated.
They were not told that Bhushan Steel, Bhushan Power and Electrosteel Steel, Lakshmi Vilas Bank, Dewan Housing Finance Ltd (DHFL) and UVSL (Uttam Value Steel Ltd), among others, have been delisted after the equity was written off. Many investors were trapped in some of these companies. (Read: Many Ways of Being Fooled in a Bull Market
RIL has been looking to diversify its business from petrochemicals to telecommunication, green energy and fashion. It has recently purchased IPR (intellectual property rights) to use the iconic Lee Cooper brand in India and acquired a stake in some other fashion brands. RIL is interested in Sintex since it had been a supplier to global brands such as Armani, Hugo Boss, Diesel and Burberry. RIL has also partnered with Burberry Group Plc, Hugo Boss AG and Tiffany & Co.
Since 1 January 2022, however, shares of the textiles company fell nearly 60%, data showed.
On 4 January 2022, Sintex hit its (adjusted) 52-week high of Rs20.45 on the BSE. However, since then, it is on a downhill journey. It remained at Rs7.82, down 5%, while the 30-share Sensex ended Monday 571 points down at 57.292.49 points.