MUMBAI: Suraksha Realty, the successful bidder of Jaypee Infratech, will pay an exit price to the retail shareholders while taking the company private, setting a precedent in cases where distressed listed companies are being acquired through the Corporate Insolvency Resolution Process (CIRP).
The successful resolution applicant of Jaypee Infratech will pay on a par with the liquidation value of the company to its shareholders holding about 542 million equity units while delisting the company from the stock exchanges.
“The board of directors of the company has fixed June 21, 2024, as the record date for determining the names of the shareholders to whom the exit price will be paid for the purpose of delisting and subsequent extinguishment of issued equity shares,” said a regulatory disclosure.
The company said that the existing public shareholders shall be given an aggregate exit at a price of Rs 14 lakh, which is not less than the liquidation value. “The payment to equity holders is a goodwill gesture,” said a lender.
Ashish Pyasi (partner) Aendri Legal, said the shareholders of a company are the last stakeholders in the waterfall mechanism provided under the insolvency code.
“In most cases, the debt is so high that even the financial creditors are not fully paid and have to take a haircut under the plan so the question of the last person standing in the queue getting anything doesn’t arise,” said Pyasi.
“Jaypee Infratech resolution plan is unique where the applicant is offering exit prices to the retail shareholders. Even in big cases like DHFL, a zero exit price was proposed. So in this sense, the step by the resolution applicant is unprecedented.”
At the time of the approval of the resolution plan, the distressed builder had admitted liabilities of over Rs 23,083 crore, including Rs 9,783 crore from its secured financial creditors.
“Payment to shareholders has been a bone of contention as generally as per Section 53 the payout is not even enough to pay financial creditors. This order will clearly set some precedent for future similar cases,” said Nipun Singhvi, managing partner of law firm NSA Legal.
“Shareholders are at the bottom of the pyramid and payment to them is a ray of hope but varied practices. In the past, in cases such as National Steel and Agro Industries (NSAIL), Videocon Industries and Sintex Industries, their respective acquirers didn’t propose any payment to shareholders.”
The development comes at a time when an investor in Reliance Capital (RCAP) has approached the Bombay High Court challenging the delisting of the company shares following the closure of the resolution process. Originally, Anil Ambani promoted RCAP was acquired by IndusInd International Holdings (IIHL) through the CIRP process.
Last year, the National Company Law Tribunal (NCLT) approved Suraksha Realty’s resolution plan wherein the winning bidder will offer about 2,500 acres to the bankers and about Rs 1,300 crore by way of non-convertible debentures. The company also proposed to complete all pending flats allotted to customers in about four years.
Jaypee Infra shares closed at Rs 1.27 apiece, and the company has a market cap of Rs 176 crore.
