Reliance Industries has announced that it has acquired a 37.7 percent stake in textile manufacturer Alok Industries Ltd. for Rs. 250 crore. Further, in a regulatory filing, the company declared that post the allotment, the holding of RIL and JMFARC in the equity share capital of Alok Industries has increased to 40.01 percent and 34.99 percent, respectively. Alok Industries went bankrupt recently. Reportedly, RIL and JMFARC saved it from huge debt.
Auction of Alok Industries
Reliance had jointly bid for Alok Industries Ltd along with JM Financial Asset Reconstruction Co Ltd. The company was auctioned under the insolvency and bankruptcy law. Allegedly, the lenders took this step to pay the unpaid loans. Last year, the Ahmedabad bench of the National Company Law Tribunal (NCLT) had approved of this bid. In a regulatory filing, RIL said,
Please note that in accordance with the approved Resolution Plan, ALOK has today allotted 83.33 crore equity shares of Re 1 each at a premium of ₹2 per equity share for cash at total consideration of ₹250 crore to RIL. Pursuant to this acquisition, RIL will hold 37.7 per cent equity share capital of Alok Industries.
Moreover, as per the approved resolution plan, Alok Industries has allotted 250 crores 9 percent Optionally Convertible Preference Shares (OCPS) of Re 1 each for cash at par, for a total consideration of Rs. 250 crores to RIL.
A Short Recap
In March 2019, the Ahmedabad Bench approved the sole bid of RIL and JMFARC for Rs. 5,050 crores. Initially, RIL had planned to raise Rs. 4,550 through bank loans. They wished to infuse Rs. 500 crores equity into the company. Further, the rest is history.
More about Alok Industries
Alok Industries Ltd is a certified textile manufacturing industry based in Mumbai. It was incorporated on March 12th, 1986. Its main interest lies in polyester and cotton segments. Furthermore, its business involves weaving, knitting, processing, home textiles, ready-made garments, and polyester yarns. It exported 26% of its products over to 90 countries in the U.S., Europe, South America, Asia, and Africa. It brought in a profit of RS. 2,283.82 crores on a turnover of Rs. 3,128.76 crores in 2018-19.
Later, SBI had initiated insolvency proceedings against Alok Industries Ltd in June 2017. It was among the 12 banks with outstanding loans greater than Rs. 5,000 crores. Moreover, Alok Industries Ltd owed lenders a total of Rs. 30,000 crores. This led to the end of it.