Last week, the National Company Law Tribunal (NCLT) approved the resolution plan worth Rs 2,079 crore submitted by GAIL for JBF Petrochemicals Ltd. The verdict brought an end to the long-drawn insolvency proceedings of JBF Petrochemicals Limited.
JBF Petrochemicals had amassed a debt of around Rs 11,000 crore, and its liabilities had gone out of control. The company had initially tried to sell its assets and pay off its debt, but it was not enough. The company had been in the insolvency proceedings since January 2019, and GAIL was appointed the Resolution Applicant in February 2020.
The resolution plan was based on a combination of upfront cash payment and transfer of GAIL’s stake in JBF Petrochemicals to JBF Industries Limited. GAIL had proposed to infuse Rs. 750 crore towards upfront payment and Rs. 250 crore in the form of equity. Additionally, GAIL will provide Rs. 135 crore as interim finance for the working capital purposes of the company during the resolution period. GAIL will take over the management of JBF Petrochemicals and will operate the company as a joint venture with JBF Industries. GAIL will have a 75% stake in the joint venture, and JBF Industries will have a 25% stake.
The resolution plan submitted by GAIL was selected as the highest bidder in the third round of the bidding process. The bid was selected over the other bid submitted by a consortium of investors led by United Overseas Bank’s Singapore branch. The consortium had submitted a bid of Rs. 2,001 crore, which was lower than GAIL’s bid of Rs. 2,079 crore.
The NCLT’s approval of GAIL’s resolution plan brings a sigh of relief for the Indian petrochemical industry. The insolvency of JBF Petrochemicals had been a concern for the industry, as the company’s failure would have resulted in a loss of jobs and disruptions in the supply chain.
The approval also sets a precedent for future insolvency proceedings in the Indian corporate sector. The insolvency proceedings of JBF Petrochemicals took over two years to reach a resolution, which is longer than the time frame provided under the Insolvency and Bankruptcy Code (IBC). The IBC was enacted in 2016 to provide a time-bound process for resolution of insolvent companies.
The delay in the resolution of JBF Petrochemicals was due to a variety of factors, including the Covid-19 pandemic, litigations, and repeated bidding rounds. The NCLT’s approval of GAIL’s resolution plan shows that the IBC framework can be followed even in cases of extended delays.
The approval of GAIL’s resolution plan also highlights the growing importance of petrochemicals in India’s economy. The petrochemical industry in India has seen significant growth in recent years, primarily due to the increase in demand for plastics and chemicals. India is currently the third-largest consumer of polymers in the world, and the demand is expected to continue to grow in the coming years.
The resolution of JBF Petrochemicals is expected to boost GAIL’s presence in the petrochemical industry. GAIL is primarily involved in the transportation and distribution of natural gas, but the acquisition of JBF Petrochemicals will allow it to diversify into manufacturing and marketing of petrochemicals.
In conclusion, the NCLT’s approval of GAIL’s resolution plan for JBF Petrochemicals brings an end to the long-drawn insolvency proceedings of the company. The resolution plan sets a precedent for future insolvency proceedings in the Indian corporate sector by showing that the IBC framework can be followed even in cases of extended delays. The approval also highlights the growing importance of petrochemicals in India’s economy and is expected to boost GAIL’s presence in the petrochemical industry.