Ahmedabad, 25 June 2018: Gujarat NRE Coke Limited (GNCL), the flagship company of Gujarat NRE group, is one of the first few cases, with operational plants and more than 1200 employees, in India to be voluntarily referred to the Corporate Insolvency Resolution Process under the Insolvency Code. This decision by the company’s Management was a dedicated attempt with the intent to revive the company in a time-bound process, the company said today here in a statement.

The company statement further said: despite their being a viable resolution plan prepared in consultation with Price Waterhouse Cooper (PwC) and submitted well within the 180 days deadline, the same could not be implemented vide IBC ordinance promulgated on 23rd Nov 2017, which blurred the difference between wilful defaulters/fraudsters and honest promoters subject to market conditions, making all promoters indiscriminately ineligible to propose a Resolution Plan for the revival of the company. Inspite of being a viable and operational company, the strict timeline of the IB Code forced the company into liquidation. But in a legal first, the Hon’ble NCLT, Kolkata Bench, recognizing the viability and strength of the company ordered the liquidation as a “going concern”.

Arun Kumar Jagatramka the promoter/ shareholder of one of the largest independent Indian producers of met coke with an installed capacity of 1.5 MTPA said he has proposed a scheme under section 230 of the Company Act 2013 to revive the company with the consent of all the stakeholders, including the shareholders, unsecured creditors, as well as secured creditors. The proposed scheme, which will be discussed in the stakeholders’ meet on 16 July 2018, promises partial debt repayment and partial conversion of debt to equity and preference shares as well as the restructuring of the equity share capital.

The management, he said is focused on operating the company to safeguard the interest of all the stakeholders, including employees, and to safeguard the interest of more than 2 lakh shareholders.

Post implementation of the scheme, the company said it is ‘expected to generate profits and start repayment of the debt as well as service interest to the secured lenders from the first year itself. The scheme does not propose any haircut to the debts due to the secured lenders while unsecured creditors would be offered equity shares and preference shares after some haircut, as per their respective classes. This is against nil realization that the unsecured creditors would have got under liquidation. Similarly, equity shareholders (more than 2 lakh public shareholders) would also benefit under the scheme since the shares of the company would continue to be listed and traded actively as against being delisted in the liquidation process and further the proposed equity restructuring under the scheme would allow them to reap the benefits of future upside in equity. NCLT, Kolkata Bench, has accepted the scheme proposed by Mr. Arun Kumar Jagatramka and has ordered to convene a meeting of all the stakeholders on 16th July 2018.’

Jagatramka in press interaction:

– The company had been served no legal notice and there was no case against it, but due to Non Performing Assets related issue, legal expenses were high and company was not able to function properly. It was the company that had filed Insolvency and Bankruptcy Code (IB code) for resolution.

– It was a time of demonetisation and slowdown in steel industry which is the main support of coke industry along with automobiles.

– Due to the fact that the company was working and it had 1200 employees, the Judges had difficulty in passing the liquidation order. Liquidation order was issued but with going concern that company should continue to operate.

– The company later noticed section 230 of Companies Act which had scheme of compromise formula provision for running and liquidated both types of companies. As per this section, if all stake holders are in agreement, the company can stay in winding up mode for period of twenty years.

– As NCLT allowed it and subsequent order was passed in the month of May, the company is now going to hold four meetings separately with share holders and investors at Kolkata where the company is registered. The scheme will be passed if prescribed proportion of agreement is achieved from shareholders and creditors.

– The company is being operated at 25% of its total capacity. If the new scheme is implemented, the company plans to scale up its operation to 60% in first six months and 100% in second/third year.

– The company’s market cap in the past has fluctuated between 500 crore to 5000 crore. In last two years the peak was Rs 2000 crore while on down side it was Rs 300 crore.

– Trading was suspended due to liquidation. Market scenario has improved for coke which is linked to auto and steel sectors. While auto is upward, steel industry is witnessing revival.

– Old coke and steel plants in Gujarat have shut down. The assets in coke industry typically is in rural area where land is not pricy and therefore liquidation value is not attractive.

– Company’s Bhachau plant is working at 15% capacity. If revival scheme is implemented, the target is to scale up the operation upto 60% in one year. Khambhalia plant in Gujarat is closed for last three years. The plant in Karnataka is 60-65% operational.

– The new proposed scheme if implemented will make the stake of banks at 38.8% compared to 32% at present, promoters’ stake 17.5% instead of 26% at present and public stake 28.5% instead of 42%. 5% stake each will be with unsecured creditors and holders. Shareholders will need to write off 90% and retain 10% so as FCCB. Unsecured lenders will need to write off 50% while in rest 50% they will get 1.5% equity and 48.5% preference share. Proposal for secured lenders is in three portions; 1. no haircut, 2. no additional funding from bank and 3. Rs 40 crore equity further converted after 38% equity for banks.

– The company’s total debt is Rs 5,143 crore which includes Rs 3500 crore secured loan from SBI led consortium, Rs 1500 crore unsecured loan and Rs 140 crore foreign currency conversion bonds.

DeshGujarat