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Vedanta arm gets nod for Videocon takeover

The Mumbai bench of the National Company Law Tribunal (NCLT) on Tuesday approved the takeover of debt-ridden Videocon Industries Ltd by Vedanta group company Twin Star Technologies in India’s first group insolvency resolution, according to sources aware of developments.

The resolution plan approved by the consolidated committee of creditors (CoC) of 13 Videocon group companies included in the bankruptcy proceedings will result in a recovery of around Rs 3,000 crore against claims of around Rs 62,000 crore by lenders, of which about half were in the form of a guarantee for the debt of Videocon Oil Ventures Ltd which is set to undergo separate insolvency proceedings.

Consumer durables company Videocon Industries Ltd was part of a list of 26 large defaulters referred to the NCLT by the Reserve Bank of India (RBI) in the second set of companies referred for insolvency proceedings by the banking regulator.

The resolution of the 13 companies of the Videocon group is the first group insolvency resolution completed under the Insolvency and Bankruptcy Code (IBC) and may serve as a test case for future group insolvency cases, according to experts.

The bankruptcy court had combined the insolvency proceedings of 13 group companies citing the operational interdependence and common liabilities among group companies and excluded two companies — KAIL Ltd and Trend Electronics Ltd — which are undergoing separate insolvency proceedings. A large creditor for KAIL accounting for over 40 per cent of the company’s outstanding debt had also argued for separate proceedings, noting that its share as a part of the CoC would be reduced if insolvency proceedings were consolidated.

Sources aware of developments noted that even though the final bid approved by the CoC was a consolidated bid for all 13 group companies, the group companies could have been acquired separately to give flexibility to potential bidders.

The insolvency process was conducted by resolution professional (RP) Abhijit Guhathakurta with Deloitte India acting as the advisor to the RP in the running of the group’s operations, marketing of assets to potential buyers, and concluding the resolution process.

An expert, who did not wish to be quoted, noted that the criteria set out by the NCLT for the grouping of distressed companies could be used for future cases. The expert did note, however, that creditors with large security interests in single companies may in such cases argue for separate insolvency proceedings.

The Corporate Affairs Ministry is also looking into passing legislation on group insolvency proceedings. The Indian Express

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