11 February 2019: Finquest Financial, one of the major financial creditors of Reid & Taylor, said it expects serious bidders to come forth for the ailing apparel maker now that it has been asked to be liquidated as a going concern by the National Company Law Tribunal(NCLT).
The NCLT had ordered the move after investors, put forth by the employees association, either declined to invest after due diligence, or failed to prove the requisite net worth.
“There will be a buyer, not many, but about 3-4 companies, who would not want liabilities on their head or tax notices slapped on them by government authorities,” Bharat Patel of Finquest told TOI. “I have already been approached by a buyer for the assets. He does not want to get into the resolution process.” Being liquidated as a going concern under the Insolvency and Bankruptcy Code has two benefits: it helps lenders recover more money against unpaid loans and creates job opportunities for at least some of those who worked in the company.
In comparison, selling such assets on a piecemeal basis is “long, painful and makes no economic sense,” a company executive said. Reid & Taylor, whose factory in Mysuru is running at much below capacity, has about 1,200 employees.Meanwhile, the employees association is set to approach the NCLAT (National Company Law Appellate Tribunal) this week for a stay order on liquidation and to prove that Indian Gas Ltd, a potential investor, has sufficient net worth.
“The way this drama has gone, it looks like the employees association is acting on behalf of the promoters, to hamper the process,” Patel said. Reid & Taylor’s creditors include Finquest, which is the largest with about Rs 800 crore of claims, Union Bank of India, Punjab National Bank, IL&FS Financial Services, IDBI Bank and L&T Finance. All are in favour of liquidation.
Patel said the factory jobs would be protected under the new owner. “Any buyer has to run the plant and bring it back to healthy capacity. Why would they retrench a lot of people?” But the employees association does not buy the argument. Patel said the meagre value of the company’s assets, just about Rs 200 crore, and the huge liability, of about Rs 4,000 crore, discouraged resolution plans. He said liquidation is the only way out.