Reliance Industries Limited – RIL ACRE wins bid to acquire Sintex Industries
The beleaguered company, Sintex Industries, mainly into textile manufacturing, was undergoing insolvency proceedings for nearly two years (since 2021). On Saturday (March 19, 2022), the resolution plan was concluded with Reliance Industries – ACRE (Assets Care and Reconstruction Enterprise) consortium to acquire Sintex Industries. According to the company filings with the stock exchanges, as per the resolution plan of RIL and ACRE, it is proposed that the existing share capital of the company shall be reduced to zero (0). And the company will be delisted from the stocks exchange, both BSE and NSE.
The resolution plan submitted by RIL – ACRE has been approved by the committee of creditors (CoC).
As per multiple media reports, so far, the claims, of financial creditors, totalling more than Rs 7,500 crore have been filed. Lenders with high exposure to Sintex Industries include PNB, BoB, Union Bank of India and Export-Import Bank. The resolution plan is about Rs 3,500 crore. Considering this offer against the claims filed, the lenders or creditors may have to take a haircut.
While it is good news for lenders, what happens to shareholders? Read to know more.
What happens to shareholders of Sintex?
Once the company has announced the date for delisting, you may sell your shares before that date. The Reliance Group has proposed to write off the entire equity capital of the company. Sintex will get delisted. If you continue to own the stock, your capital might be reduced to zero.
You can sell your shares of Sintex Industries before the delisting date approaches. If you do that, you would have already liquidated your holdings before Sintex Industries delisting.
In case you choose to hold the shares even after the delisting date, you may be able to sell your shares in the unlisted or over the counter market. However, the chances are bleak as liquidity in the unlisted market is extremely low. Finding a buyer for your shares becomes difficult which is otherwise very easily done by exchanges like BSE, NSE.
Read more on Groww: What happens when a company is delisted?
What happened to Sintex?
Sintex Industries has been in the middle of insolvency proceedings since April 2021. And invited resolution plans from interested bidders in the market.
In its recent December quarter (3QFY22) report under notes, the company mentions that it is undergoing substantial financial stress and severe liquidity constraints. This was mainly due to the changes in the industry dynamic (stiff competition, and improvement in technology), time and cost overrun in completion of projects, reduction in incentives and subsidies benefits. This along with the outbreak of the Covid-19 pandemic has exacerbated the situation and stretched its balance sheet.
According to its statement, Sintex Industries has defaulted in debt obligation of debentures aggregating to Rs 500 crore for the period April 2019 to April 2021 apart from other credit facilities. It also stated that the company’s inability to meet its obligation in relation to the payment of certain letters of credit led to devolvement and consequent overutilization of the cash credit facilities, delay in payment of certain term loan instalments as well as interest thereof.
The company’s credit rating is ‘D’ from Brickwork Ratings India Pvt Ltd for non-convertible debentures. This is the rating given to instruments that are in default or are expected to be in default soon.
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Research Analyst: Bavadharini KS