8/13/2019 Anjaneya - CDR

1/13

CDR CASE STUDIES + BIFR &DRT V. CDR

Anjaneya Das

2008-11

8/13/2019 Anjaneya - CDR

2/13

CONTENTS

CDR v. BIFR and DRT

Case studies

8/13/2019 Anjaneya - CDR

3/13

CDR V. BIFR AND DRT

Issues Performance Verdict

1. Complete Erosion

How can you revive?2. StandstillCompanies

taking advantage of

this to defraud

creditors

1. Liquidation

recommendedsummarily in a lot of

cases.

2. Schemes for revival

short-term, company

relapses into sickness.

3. Approximately 9-10%

success.

DID NOT SERVE THE

PURPOSE.

BIFR (SICA, 1985)

8/13/2019 Anjaneya - CDR

4/13

DRT (RDB ACT, 1993)

Issues Performance Verdict

1. Stalling the process of

DRT by parallel

litigation in civil courts.

2. Inter-creditor issues

1. Priority?

2. Still a judicial measure.

Worked better than BIFR,

still caused the enactment

of SARFAESI.

8/13/2019 Anjaneya - CDR

5/13

CDR

More flexible, negotiation possible between

lenders and borrower.

Private approach, no need for judicial

measures.

Priority still an issue (Wockhardt).

All said, lot more successful than BIFR andDRT.

8/13/2019 Anjaneya - CDR

6/13

CDR: SOME STATISTICS

0

20

40

60

80

100

120

140

160

180

Number of CDR

cases

2001-05

2005-10

2010-12

8/13/2019 Anjaneya - CDR

7/13

CASE 1: INDIA CEMENTS LTD. (2002)

Excess capacity in the

market no demand

sales fell drastically.

High cost acquisitions

before the market slump

debt of 1793 Crore.

8/13/2019 Anjaneya - CDR

8/13

CDR measures:

Divest interest in acquired companies such asVisaka Cements etc.

Debt rescheduling : Progressive rate of interest(3% in FY200312% in FY2012).

Moratorium of 3 years on payment of principalamount.

Moratorium of 11 years on full payment.

8/13/2019 Anjaneya - CDR

9/13

INDIA CEMENTS TODAY

Restructuring +Construction Boom =Record profits in

FY2009

Losses and

outstanding debtwiped out byDecember 2006.

8/13/2019 Anjaneya - CDR

10/13

CASE 2: WOCKHARDT (2009)

Precarious financial position

Approached ICICI to start the CDR process

CDR Measures:

FCCBs

Equity Conversion Redemption at capital

loss of 65%

8/13/2019 Anjaneya - CDR

11/13

Larger secured lenders went for conversion topreference shares.

Smaller lenders, foreign lenders, unsecuredlenderswinding up petition in Court!

Finally, settled with Asian hedge fund QVT.What does CDR achieve if demands are

contradictory?!

Foreign lenders? Small lenders? Unsecuredlenders?

Kotak Mahindras pullout in 2011

8/13/2019 Anjaneya - CDR

12/13

DANGEROUS WATERS

Indage Vintners :

400 Crore in debt

Deferral of debt obligations for 2 years

Infusion of fresh capital (75-100 Crore) at the

personal guarantee of promoters

Still uncertain, CDR on hold, banks waiting to file

winding up petition.

8/13/2019 Anjaneya - CDR

13/13

PROPOSED CASES:

Leela Ventures4300 Crore debtreduction in

interest rates, divesting ventures, debt

rescheduling.

Basix Inc microfinance firm 800 Croreproposal 500 Crore fresh equity infusion and

300 Crore towards restructuring of long term

debts.