ITC Limited and two other companies have stepped forward to submit resolution plans for Shakti Bhog foods, a wheat flour manufacturer based in North India. Sources familiar with the matter reveal that Shakti Bhog has defaulted on a significant amount of bank loans, totaling INR 7,000 crore. As a result, the company is currently undergoing insolvency proceedings at the National Company Law Tribunal (NCLT).
According to the sources, ITC Limited, headquartered in Kolkata, has presented a resolution plan focused on acquiring Shakti Bhog foods’ brands. On the other hand, the two other bidders have submitted plans aimed at taking over the entire company as a going concern. This means they intend to acquire the entirety of Shakti Bhog foods, including its operations and assets.
Adding to the bid from ITC Limited, two other companies, Vidya Polymer and Shanti GD Ispat and Power Limited, have also submitted their respective resolution plans for Shakti Bhog foods. While ITC Limited’s plan focuses on acquiring the company’s brands, the other two bidders have expressed their intent to take over the entire company as a going concern.
Traditionally, bankers prefer offers that encompass the entirety of the company. However, with the evolution of regulations under the Insolvency and Bankruptcy Code, piecemeal sales of assets belonging to bankrupt companies are now allowed.
Notably, the State Bank of India has provided a loan of INR 4,700 crore to Shakti Bhog foods.
In response to queries, a representative from ITC Limited stated, “We do not comment on market speculation.”
Queries sent to Vidya Polymer and Shanti GD Ispat and Power Limited remained unanswered as both companies did not respond.
According to sources, Union Bank of India, Punjab National Bank, and Standard Chartered Bank are among the other major lenders to the company. These banks might have to face a substantial reduction of up to 95% in the amount they can recover, as it is unlikely that the resolution offers will exceed INR 500 crore.
“There are barely any assets left in the company. The value is in the brands,” said an executive aware of the matter.
Shakti Bhog Foods was admitted to insolvency proceedings by the bankruptcy tribunal on September 22, 2022. Before the amalgamation of the associate banks with the parent bank in 2017, State Bank of India’s associated banks, namely State Bank of Mysore, State Bank of Patiala, State Bank of Bikaner and Jaipur, and State Bank of Travancore, had extended loans to the company.
A total of 13 banks and asset reconstruction companies have provided loans to the company. Kewal Krishan Kumar, the former Chairman and Managing Director of the company, is currently under investigation by the Central Bureau of Investigation and the Enforcement Directorate for alleged defaults on bank loans.
