InvestorQ : Why did banks do a U-Turn and reject the Videocon deal, they had formerly accepted?
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Why did banks do a U-Turn and reject the Videocon deal, they had formerly accepted?

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Juvina Maggie answered.
2 months ago
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It looks like the banks have become wary after the Jet Airways episode. In the Jet Airways episode, the banks had accepted the awfully low compensation offered by the Kalrock Jain consortium but when the employees had raised a furore, the banks also decided to take the side of the employees. A similar case is also opening up in the case of Videocon Industries wherein banks have done a U-turn and approached NCLAT against earlier NCLT approval.

It was rather surprising that the consortium of banks accepted Vedanta’s bid for Videocon Industries in the first place, which was ridiculously low and made a mockery of the NCLT process. As per the offer made by Vedanta, the total accepted claims were Rs.2,962 crore against the admitted claims of Rs.64,839 crore. That is an awfully low acceptance ratio of just 4.15%. The pay-out to the operational creditors is still lower at about 1%.

In a largely justifiable move, the consortium of banks led by SBI has now approached the NCLT Appellate Tribunal or NCLAT calling for rejecting the earlier approval of NCLT and treating it as null and void. The principal objection has come from SBI, which has 18% vote share in the insolvency process. Clearly, this comes as a template for future NCLT transactions where companies will not be able to get away with ridiculously low bids.

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