Page 30 - Banking Finance July 2019

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make the insolvency resolution process under the IBC more Soya under proceedings of Insolvency and Bankruptcy Code.
transparent. Further, it could also help banks realize more In the first round of bidding, Adani Wilmar emerged as the
value from the bidding process and possibly reduce litigation. highest bidder at INR 6000 Cr.

Big expectation that SCM will prove fruitful in The second round of bids have been kicked off, now Patanjali
has the opportunity to either better their bid such that it
checking NPA woes
beats the highest bid or back out from the process and let
"There were a lot of expectations that the IBC would be a
Adani Group acquire Ruchi Soya.
quick fix to our NPA (non-performing asset) woes and the
financial institutions will get proceeds from the sale of some
Benefits of Swiss Challenge Method
of the stressed assets in near future. However, the process
is getting involved in litigation with bidders thereafter As we can see in the case of Bhushan Steel, it was just
dragging each other to court to prove their rivals' ineligibility because of this method that the banks realized extra INR
and their own eligibility or coming up with superior offers 5,300 Cr (Highest bid in first round Vs. Highest bid in the
after bids have been opened - are to be dealt with tactically. second round). So, it can be concluded that this method is
very helpful in realizing the fair value of the stressed assets
In the recent past, some banks have resorted to the Swiss or government assets. This method would also be very
Challenge method to offload their stressed assets under the helpful in bidding for government tenders and bidding for
Securitisation and Reconstruction of Financial Assets and the sale of natural resources like airwave and mining rights.
Enforcement of Security Interest Act, 2002. If this method was used from the start the scams like
Coalgate and 2G Spectrum scam would never happen in our
For example, in March 2018, Jammu & Kashmir Bank had country.
invited counter-bids for the sale of its exposure to Essar Steel
India Ltd and Odisha Slurry Pipeline Infrastructure Ltd under All you wanted to Know About...Swiss
this method on a 100 per cent cash basis.
Challenge
Case Study: Bhushan Steel
Bhushan Power & Steel is one of the 12 companies identified
by the RBI in its first list for resolution under the Insolvency
& Bankruptcy Code. Its outstanding dues stand at a
staggering INR 45,000 crore.

Bhushan Steel was acquired by Tata Steel recently. Tata Steel
Ltd (TSL) emerged as the highest bidder for Bhushan Steel
Ltd with a revised bid of INR 35,000 Cr. JSW Steel Ltd was in
the second place with a bid of INR 29,700 Cr, according to
media reports. In the initial round of bidding, Tata steel was
at the second place with their bid of INR 24,000 cr while What is it?
JSW Steel was leading with their bid of INR 29,700 Cr. Applied to the ongoing bankruptcy cases, a ‘Swiss Challenge’
However, the tables turned around in the final round. may entail two rounds of bidding for a distressed company
or its assets. Assume that Company A wins the first round
Case Study: Ruchi Soya of bidding by a quoting a price of Rs.5,000 crore for a power
Ruchi Soya is an edible oil manufacturing company that was plant. This will be made public and a second set of bids
declared insolvent recently. Baba Ramdev promoted - invited. If Company B quotes Rs.5,500 crore, Company A will
Patanjali and Adani Group company - Adani Wilmar have be offered a second opportunity to match it. If it refuses,
been competing against each for the acquisition of Ruchi Company B would be declared the winning bidder. If

30 | 2019 | JULY | BANKING FINANCE