Informist, Tuesday, May 17, 2022
--Sources: Birla Tyres' committee of creditors to be in place by June
--Promoters of Birla Tyres may seek stay on NCLT order
By Avishek Rakshit
KOLKATA – A committee of creditors which will decide on the future course of insolvency proceedings against Birla Tyres Ltd is likely to be in place by the first week of June, even as the company's promoters are evaluating various options to avert bankruptcy proceedings, sources said.
The formation of a committee of creditors, which has the authority to accept or reject a resolution plan, is the first crucial step in commencing insolvency proceedings against a company.
Lenders are claiming 12-18 bln rupees as receivables from Birla Tyres, one of the sources said, adding that the sustainability of such claims is yet to be verified and established.
Seikh Abdul Salam, the interim resolution professional appointed by Kolkata bench of the National Company Law Tribunal, has invited claims from the company's financial creditors latest by Friday. The claims will then be evaluated for admission to the tribunal.
Another source said that promoters of Birla Tyres are also looking at options which could include an out-of-court settlement with SRF Ltd, which had dragged the B.K. Birla Group company to the tribunal over alleged dues of 158.45 mln rupees.
The promoters of Birla Tyres are also considering approaching the National Company Law Appellate Tribunal for a stay on the insolvency proceedings against it, the second source said.
SRF is a Gurugram-based chemicals company and an operational creditor to Birla Tyres. The National Company Law Tribunal admitted SRF's petition against Birla Tyres under Section 9 of the Insolvency and Bankruptcy Code, 2016, which allows operational creditors to file an application for initiating insolvency proceedings against a defaulting company.
Even if insolvency proceedings against the company get underway and bids for takeover are submitted, there could be huge haircuts for lenders as the net worth of Birla Tyres is in the negative, sources said.
As on Mar 31, 2021, the net worth of Birla Tyres was minus 5.7 bln rupees.
As on Mar 31, the company's total debt stood at 9.8 bln rupees with net current liabilities at 18.7 bln rupees.
Meanwhile, IndusInd Bank invoked pledged shares of the company held by Manav Investment and Trading Co Ltd, one of the promoters of Birla Tyres, bringing the investment company's holding down to 14.01% from 24.22%, the company said today in a filing with the bourses.
DBS Bank has also invoked pledged shares of Manav Investment, but the matter has been challenged in the Calcutta High Court, sources said.
Citing unfeasibility of audit fees, Birla Tyres' external auditor Deloitte Haskins & Sells has also resigned leaving the company with no external auditors. Sources said the interim resolution professional is currently in talks with three chartered accountant firms and negotiating a considerably lower fee for appointment as external auditors.
Today, shares of Birla Tyres closed nearly 5% lower at 9.95 rupees on the National Stock Exchange. End
Edited by Aditya Sakorkar
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