Are non-serious bidders delaying insolvency resolution process?

When on looks at the list of prospective resolution applicants in several corporate insolvency resolution cases, one wonders why so many bidders from unrelated sectors would be interested in a particular corporate debtor.

A waste management company or a scrap dealer lining up for a renowned retail outlet, or a well-known steel manufacturer vying for a food tech company that manufactures – lo and behold – juices and gravy.

Can it be a case of a filling a gap in the product portfolio of a company, or a case of diversification, or worst, a case of proxy bidders propped up by the ex-promoters, or rival bidders?

When Insolvencytracker.in noticed that there are over a dozen waste management and scrap dealers vying for Future Retail, we wondered if they stand any chance against the likes of Reliance Retail Ventures, Adani Group, or for that matter stressed asset companies like JC Flowers. What if these scrap dealers or waste management companies are eyeing for the ‘scrap’ left in Future Retail as the stores are now anyway under the control of Reliance Industries? But why would they bid for the whole company just for the scraps?

We looked at the list of prospective resolution applicants of another company– a random choice – Tirupati Foodtech Pvt Ltd.

The company is engaged in the business of manufacturing of gravy products, canned fruit juice & masala products in Aurangabad. The product and services offered by the company is vegetable paste, frozen American sweet corn, frozen cob corn, frozen vegetables, frozen fruit chunks, frozen fruit pulp, frozen Indian snacks, which were being exported to countries like Japan, USA, UAE, Iran and other countries.

So, who all showed interest in acquiring the company – a couple of steel manufactures including Jindal Steel and Power, and a number of consulting firms including BDO India LLP. Ultimately, an individual named Jitendra Bhandari emerged as the successful resolution applicant for Tirupati Foodtech.

In case of Andhra Cement, which was acquired by Sagar Cement through a CIRP, there were four companies in the provisional list of resolution applicants. Apart from Sagar Cement and Dalmia Cement (Bharat), Jindal Poly and Khandwala Finstock Private Limited had also shown interest in buying the erstwhile Jaypee group firm. While Jindal Poly is engaged in diverse businesses including polyester & polypropylene films, power generation, cold rolled steel strips, galvanized sheets, etc, and hence entry into cement biz may not be such a surprise. But for Khandwala Finstock, a stock and commodity trading company, to vie for cement business is a little too much. Nonetheless, in the final list of PRAs only two cement companies were left.

Not that it is a norm to have completely unrelated businesses bidding for a corporate debtor undergoing CIRP. We looked at the list of prospective resolution applicants of Sathavahana Ispat, a manufacturer of pig iron, metallurgical coke and co-generator of thermal power. The list included Jindal Saw, which emerged as the successful bidder, Vedanta Ltd, Welspun Corp and Sarda Mines Pvt Ltd.

While it is true that as long as you are eligible for bidding for a company undergoing CIRP, nobody should question the intentions of a bidder, the question, however, is if too many non-serious bidders are also the reason for unnecessary delay in the corporate insolvency resolution process.

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