The shares of Sintex Industries Ltd (Sintex) are lower circuit from 11 January 2022 onwards after a report from The Economic Times mentioned that Reliance Industries Ltd (RIL) and Welspun have emerged as the top-2 contenders with conditional bids to acquire the bankrupt company.
The report says that the RIL offer, if accepted, will lead to existing equity being written off. In the new shareholding structure, RIL will hold 79%, Assets Care and Reconstruction Enterprises (ACRE) will hold 11% and lenders will receive a 10% equity stake. However, the plan is not yet finalised and Sintex Industries' resolution professional (RP) Pinakin Shah has asked the two bidders to resubmit their revised ‘unconditional’ resolution plans.
The latest shareholder data showed that individual investors with up to Rs2 lakh capital are holding 74.02% stake in the company. Retail investors have been buying most of the stocks going into such resolution proceeding, in the hope to find the next Ruchi Soya. But most resolutions are leading to equity write off such as DHFL(Dewan Housing Finance Corporation Ltd). It is still not clear how the resolution plans became public and who leaked, it as it is a clear violation of the resolution laws.
On the news item Sintex clarified "Presently, the company is under the corporate insolvency resolution process (CIRP) under the IBC Code 2016 and is making all necessary disclosures required to be disclosed under the said Code and the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015."
A bunch of shareholders have demanded that since details of the bids have been leaked, it violates the principle of maintaining confidentiality during the entire resolution process.
They cite a comment by the Mumbai bench of the National Company Law Tribunal (NCLT) in the Videocon resolution case. The NCLT had said, “…even if the confidentiality clause is in existence, in view of the facts and circumstances as discussed above a doubt arises upon the confidentiality clause being in real-time use, therefore, we request IBBI to examine this issue in depth so as to ensure the confidentiality clause is followed unscrupulously, without any compromise in letter and spirit by all the concerned parties, entities connected. If not IBBI can frame appropriate regulations, safeguards there by the maximisation of value of the assets of the Corporate Debtor(s) would further increase which in turn will benefit all the stakeholders.”
Citing this ruling, shareholders of Sintex have requested the resolution professional to cancel the existing ongoing process immediately; invite fresh bids; debar the defaulting bidders – RIL and ACRE from the process.
Lenders of Sintex Industries have received 16 expressions of interest (EoIs), including bids from foreign fund CarVal Investors and Varde Capital-backed Aditya Birla Asset Reconstruction Co. Other EoIs came from Edelweiss Alternative Assets Advisors Ltd, Asset Reconstruction Company of India (Arcil), Prudent ARC, Ludhiana based Trident Ltd, Punjab-based Lotus Hometextile, Mumbai-based Indocount Industries and Nitin Spinners.
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 entered into partnerships with Burberry Group Plc, Hugo Boss AG and Tiffany & Co.
Spring Ventures a deep tech investment firm led by Aviv Refuah had also bought 30.5 lakh Sintex shares at Rs12.7 per share in December 2021. The matter is still under consideration and equity write-off (delisting) may be declined by SEBI (Securities and Exchange Board of India) as in the case of Alok Industries which has been acquired by RIL.
SEBI, addressing minority shareholders concerns in the case of Alok Industries, said the resolution plan must lay down “specific procedure to complete delisting of such shares or provide an exit option to the existing public shareholders at a price specified in the resolution plan.”