Assam Company RP seeks extension to complete process

Anticipating a difficult resolution process for Assam Company, which is facing insolvency proceedings in the National Company Law Tribunal’s (NCLT’s) Guwahati Bench, company’s resolution professional (RP) T Kannan has asked for an extension till July 23 from the tribunal to complete the process.

The problem is on the account of the debt structure of the company. Sources said the maximum debt is taken by the firm for its oil business, whose assets currently have negligible liquidation value. On the other hand, its only assets are the 14 tea gardens which can fetch a liquidation value of around ~2.8-3.5 billion but then the debt is minimal for the tea business.

“This will put the bidders in dilemma as the primary assets (tea gardens) have negligible debt while the acquirer has to pay the creditors for assets (oil business), which is practically non-existent” a source told Business Standard.

The total debt of the company stands at ~14.10 billion and it is anticipated that 12 lenders, including SREI, which pulled up Assam Company to the NCLT in October last year, will have to take a huge haircut on their admissible claim.

Kannan had appointed Khaitan & Company for counsel, which advised him not to accept split bids for the resolution plans from the bidders. “If the tea and oil entities are separated for the resolution plan, there will be bidders for the tea business and there will be a

dearth of bidders for the oil business,” the source said.

Earlier, Kannan had called a lenders’ meeting on different instances but an expression of interest is yet to be floated. “I have asked for an extension of the resolution process to the NCLT’s Guwahati Bench as the sale may take time to complete,” Kannan said. He has been able to raise interim finance twice — ~100 million from SREI and ~320 million from Dhunseri Petrochem & Tea — at a 16 per cent rate of interest. Most of this interim funds have been used to pay salaries of the tea workers and maintain the gardens.

However, the sale is going to be difficult because of the spread of debts, sources said. Apart from Indian firms — Dhunseri Petrochem and Tea and Warren Tea — one tea maker from London and another from Singapore had

shown preliminary interest in buying the firm. Both the firms have gardens in Africa and Sri Lanka. Besides, forensic audit of Assam Company’s accounts is also underway at the behest of Allahabad Bank, one of the financial lenders.

According to a tea industry official, Assam Company’s tea business looks attractive for a takeover but the oil business can be a drag as most of the major tea firms either do not have an existing line of oil business or are not interested. Dhunseri, however, has a foreign subsidiary, Dhunseri Petrochem & Tea, which is into the oil business. Assam Company entered the oil business in 2010 in a 40:60 partnership with Canoro Resources at Amguri oilfield in Assam.

However, the central government terminated the tie-up and a legal tussle broke out, which was finally resolved in

February last year after the Arbitral Tribunal Board declared Assam Company as the sole owner of the oilfield. However, operations in the oilfield did not start, leaving the tea business as the only revenue generator for the insolvent firm.

Sources said industry biggies such as McLeod Russel, Goodricke India, and Tata Global Beverages, who were currently prioritising retail sales, might not be interested to bid.

Kannan said SREI had given a loan of ~1 billion to Gujarat Hydrocarbons and Power SEZ, a subsidiary of Assam Company as guarantor. Upon nonpayment of the due, now ~5.95 billion, the parent firm was dragged to the NCLT.

Set up in 1839, Assam Company is India’s first tea plantations enterprise and also the pioneer in oil exploration in Assam way back in 1889.