Jaypee Infratech customers object to bid evaluation criteria
It is not just the promoters but also stranded homeowners of Jaypee Infratech’s (JIL’s) various projects as well as minority shareholders, totalling around 138,000, who are fearing massive losses if the valuation of the firm is slashed by less than half. They have written separately to the resolution professional, objecting to the evaluation criteria for bids for JIL. The committee of creditors is slated to meet on Monday to take a call on various bids that have come for JIL. KARAN CHOUDHURY & VEENA MANI write
It is not just the promoters, but also stranded homeowners of Jaypee Infratech’s (JIL’s) various projects as well as minority shareholders totalling around 138,000, who are fearing massive losses if the valuation of the beleaguered firm is slashed by less than half. They have written separately to the resolution professional objecting to the evaluation criteria for bids for JIL.
The committee of creditors (CoC) is slated to meet on Monday to take a call on various bids that have come for JIL. Homebuyers and minority shareholders have written separately to resolution professional Anuj Jain, objecting to the evaluation criteria for the bids.
While the bidders are making offers ranging between ~70 billion and ~80 billion, sources close to the company said the valuation of the company is not less than ~160 billion.
“The company has over 3,300 acres in land bank which is all unused. That itself is worth over ~100 billion. The rest in assets makes the valuation of the company around ~160 billion,” a source close to the company said.
In letters, the minority shareholders as well as a group of homebuyers asked for re-evaluation of the bids and wanted their requests be considered; a slash in the valuation would seriously dilute the money they would otherwise get from the deal.
As observed from the objections filed by JIL in the National Company Law Tribunal (NCLT), on a conservative basis, the value of its assets is much higher than the total borrowing of approximately ~90 billion including overdue interest, the minority shareholders have stated in their letter to the resolution professional.
It is further shocking to know that the figures of valuation for the company now being quoted are far below those admitted and sworn only a few months ago by IDBI Bank in their application before the NCLT, the letter stated.
They have now requested for a clarification on the position of the resolution professional and also protect the interests of all stakeholders before recommending any resolution plan to the CoC, the NCLT, and the Supreme Court (SC).
A group of homebuyers, on the other hand, is aggrieved that the evaluation criteria for the bids are heavily loaded in favour of financial creditors. It said the evaluation criteria were not shown to any of the amici curiae appointed by the Supreme Court for approval.
On a petition of homebuyers, the SC had appointed Shekhar Naphade, senior advocate,
and Shubhangi Tuli, an advocate, as amici curiae to espouse the cause of homebuyers in the CoC.
The homebuyers, in the letter, claimed that the quantitative part of the evaluation criteria gave only 25 points to homebuyers and 45 to financial creditors. Currently, homebuyers are not given the status of financial creditors. An official committee to review the Insolvency and Bankruptcy Code did recommend placing homebuyers on a par with financial creditors, but those suggestions are yet to be incorporated in the law by the government.
However, the SC had directed the resolution professional to protect the interests of homebuyers in the resolution plan.
This is not the first time. Questions have been raised on the valuation of the company. India Infrastructure Finance (IIFCL), which has claims of about ~9 billion, or 10.57 per cent of Jaypee’s total debt, wants a “fair and transparent” process adopted and the current evaluation that pegs the company’s worth at less than half of its market value, which it pegged at ~171.1 billion, be “summarily scrapped.”
IIFCL, in a letter to the resolution professional, tore into its valuers assuming a much less toll collection from the Jaypee-built expressway. “The valuation conducted by the lenders consortium recently during 2017, the pessimist scenario for the toll collection from the expressway aggregate to ~67,980 crore (~679.8 billion) during the remaining concession period i.e., from April 2018 to August 2048”, it wrote. “Considering a discounting factor of 8 per cent per annum, the net present value works out to ~15,426 crore (~154.26 billion). However, the valuer had assigned a valuation of ~2,395 crore (~23.95 billion) only,” it pointed out.