anjaneya - cdr
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CDR CASE STUDIES + BIFR &DRT V. CDR
Anjaneya Das
2008-11
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CONTENTS
CDR v. BIFR and DRT
Case studies
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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)
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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.
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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.
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CDR: SOME STATISTICS
0
20
40
60
80
100
120
140
160
180
Number of CDR
cases
2001-05
2005-10
2010-12
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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.
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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.
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INDIA CEMENTS TODAY
Restructuring +Construction Boom =Record profits in
FY2009
Losses and
outstanding debtwiped out byDecember 2006.
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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%
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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
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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.
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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.
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