No action against Alok Industries until HSBC’s plea settled: Bombay High Court

MUMBAI: The Bombay High Court on Tuesday ordered that no action can be taken against textile maker Alok Industries until a winding up petition filed by HSBC against it is settled, a ruling that will prevent the company from selling its assets or changing its equity structure.

Indian banks, which had set in motion this process to recover their dues, will now have to wait as the court has fixed the next hearing on April 6.

HSBC, on behalf of a consortium of unsecured lenders led by VTB Capital, has filed a petition to liquidate Alok Industries and settle outstanding dues worth $55 million from a loan of $125 million that the company had taken.

The company had offered guarantee in an offshore holding company which has no assets that can be seized by these lenders, said a person familiar with the matter.

Last week, ET had reported bulge-bracket private equity funds TPG Capital Management, KKR & Co LP, Vardhman Group, Trident and a joint venture between Ajay Piramal Group and Brescon were vying to take control of debt-ridden Alok Industries, one of India's largest exporters of home textiles. Following the report, HSBC filed a follow-up petition to prevent any such sale, pending the settlement of issues.

Trilegal, an empaneled firm, is representing HSBC, while Sharan Jagtiani is representing Alok Industries.

Alok Industries is in the process of undergoing a strategic debt restructuring in which a joint forum of 25 banks led by State Bank of India that lent around Rs 13,000 crore to the company, decided in January to convert the loans into a 65% equity stake.

SBI Capital Markets has since been mandated to run a formal auction process to sell the core businesses as a whole or in parts and had called an extraordinary general meeting earlier last week.

While the process is aimed at repayment to secured lenders, mostly PSU banks, it has no proposal for unsecured lenders, who as the term suggests, rank lower in the repayment scheme.