CoC won't accept revised Varde-Arena offer for two Srei companies

The committee of creditors (CoC) of the two Srei companies has decided not to accept the revised bid by Varde-Arena which came after the close of the ‘Challenge Mechanism’ auction.

Varde-Arena had revised its offer upwards after National Asset Reconstruction Company (NARCL), the government-backed bad bank to take over stressed assets of lenders, emerged as the highest bidder in the auction that was conducted on Tuesday.

Sources close to the development said that the revised offer was not being accepted by the CoC on grounds of non-compliance of request for resolution plan (RFRP) rules. The CoC may ask Varde-Arena to ensure compliance with the RFRP document.

A response from Varde was awaited at the time of filing the report. The administrator declined to comment.

The ‘Challenge Mechanism’ consisted of five rounds and Varde-Arena participated until the second round. “Based on the RFRP rules, that will be the base for their resolution plan,” the sources added.

The competitors until the last round were NARCL and Authum. But NARCL’s bid was the highest with a net present value (NPV) of Rs 5,555 crore (Authum’s was at Rs 5,526 crore).

The sources added that all the three resolution plans -- NARCL’s, Authum’s, and Varde-Arena’s -- would be put to vote, most likely on January 10 and banks would have time until January 31 to approve a plan.

The resolution plans comprise upfront cash component and deferred payments by way of issue of instruments like debentures. NARCL emerged as the highest bidder on the basis of commercial value. However, sources indicated that the voting may not be just on commercial value.

Total admitted claims of financial creditors against the Srei firms are Rs 32,750 crore. Financial lenders include State Bank of India, Punjab and Sind Bank, Axis Bank, HDFC Bank, Union Bank of India, IDBI Bank, UCO Bank, and Indian Overseas Bank.

 It may be mentioned that in October 2021, the Reserve Bank of India superseded the boards of SIFL and SEFL, and thereafter, the corporate insolvency resolution process was initiated on applications by the central bank.