With Alok Industries heading into likely liquidation, about 12,000 permanent employees of the company are set to lose jobs in what could be the biggest labour casualty since the implementation of the bankruptcy code.
These employees earned an average salary of Rs 1.45 lakh a year, show data compiled by Corporate Professionals that used the financials reported by the company for 2016-17. Alok Industries was subsequently referred for insolvency proceedings.
“While considering the resolution plans, lenders are looking at only the recovery aspect,” said Manoj Kumar, partner & head – M&A and Insolvency Service at Corporate Professionals, a Delhi-based firm. “If they feel that an offer does not meet their expectations, they refuse to approve the resolution plan and the company goes into liquidation. While lenders must protect the commercial interest, they should also look at the collateral damage of liquidation.”
There were 11,759 full-time employees as on March 31, 2017, while total staff strength was 18,000. Staff costs amounted to Rs 283.31crore during that financial year.
Hundreds of small vendors and service providers to the company would also be affected. About 2.05 lakh equity shareholders, including public financial institutions and retail investors, are also staring at losses with the company heading into liquidation.
The resolution professional has referred Alok Industries for liquidation last Saturday. The 270-day deadline before which lenders had to finalise a resolution plan ended April 14. It owes Rs 29,500 crore to the lenders.
State Bank of India is the lead banker. Earlier last week, lenders to Alok Industries did not approve a sweetened offer by Reliance Industries-JM Financial ARC to acquire the bankrupt company. Only 70% of the lenders endorsed the revised all-cash offer of Rs 5,050 crore, which was just about Rs 100 crore higher than the previous proposal, ET reported. For a resolution plan to be accepted, at least 75% of the lenders must vote in its favour.
Alok Industries is one of the few companies where the resolution professional called for a resolution plan multiple times after the borrower was admitted for bankruptcy proceedings.
There are 81 companies that have already gone into liquidation under the Insolvency and Bankruptcy Code. More than 100 other companies facing insolvency processes are on the verge of liquidation, according to Corporate Professionals.