IRPs spar over Videocon mandate

Lenders invite bids twice; Alvarez & Marsal wins mandate

The appointment of an Insolvency Resolution Professional (IRP) for Videocon Industries has sparked a row among top audit companies, with Alvarez & Marsal winning the bid but some others complaining that their bids were far lower.

The lenders, led by State Bank of India, invited bids from top audit and consulting companies Alvarez & Marsal, Deloitte, Price Waterhouse, KPMG, Grant Thornton, EY and BDO. These firms made presentations highlighting their experience in handling debt resolution.

On Friday, Alvarez & Marsal (A&M) was selected but a couple of IRPs said their bids were lower than the winning bid.

Banks invited fresh bids on Saturday, where A&M was again selected. “The earlier process on Friday had a technical flaw. Hence, fresh bids were called,” a senior public sector bank official said. A lender said A&M as the resolution professional was selected late on Saturday night on the criterion of lowest financial bid after the technical bidding process.

Sources in audit firms said A&M’s initial offer was ~1.6 crore a month, made on Friday, which it reduced to ~80 lakh a month on Saturday after all bidders for the mandate objected to the initial offer. Grant Thornton had made the lowest bid of ~70 lakh a month, said a source. The IRP process is expected to last 10 months.

A source in a leading audit firm said it, too, had made the second presentation and bid on Saturday and was in “wait” mode. “We are waiting for information from the bank (SBI) on who won the mandate,” the source said.

The meeting to appoint the IRP was taken by State Bank of India, and was attended by other banks such as ICICI Bank, IDBI Bank, Canara Bank, Corporation Bank and Central Bank of India.

A mail sent to A&M did not elicit any response. Videocon declined to comment.

The Reserve Bank of India had sent the first list of 12 companies

to the National Company Law Tribunal (NCLT) in June, after these companies defaulted on loans. Videocon is part of the second list of 28 companies identified by the RBI for resolution under the Insolvency and Bankruptcy Code.

Altogether, RBI has asked banks to resolve debt of almost ~2,50,000 crore and set aside 50 per cent of these loans as provisioning. Reliance Communications also became a non-performing asset in the December quarter but is not on the RBI list. The banks will make 15 per cent provision for RCom’s ~44,700-crore loan.