The consortium of Varde Partners and Arena Investors claimed that the challenge mechanism process for the new scheme to invite qualified resolution applicants for the two Srei companies was carried out on “short notice” and that a revised bid has been submitted, increasing the cash portion up to Rs 3,600 crore. New offers appear after the challenge mechanism process. However, the move, like what has been seen in Reliance Capital’s ongoing settlement process, was not popular with some bidders, who described it as a “back door” entry.

Following the bidding, the consortium has emerged as the top resolution applicant for a total of Rs 14,000 crore comprising bonds, optional convertible debentures (OCD), equity and cash advances, the sources said. This is higher than the bid submitted by the National Assets Reconstruction Corporation (NARCL). The Rs 5,555 crore net present value (NPV) bid by state-backed NARCL, which included an upfront cash payment of Rs 3,180 crore, was found to be the highest bid after the challenge mechanism process.

In addition to non-convertible debentures (NCDs), Bad Bank has also offered to pay about Rs 6,000 crore in optional convertible debentures (OCD), bringing its total program to about Rs 12,660 crore. The Varde Partners and Arena Investors consortium, which had been at odds since the start of the corporate insolvency resolution process (CIRP) of the two NBFCs, withdrew from the challenge mechanism process at the end of the second of five rounds of talks on Tuesday. The consortium’s net present value-based financial bid was Rs 4,687 crore, including about Rs 3,250 crore cash advance.

Authum Investment and Infrastructure’s bid of Rs 5,526 crore (in NPV terms) is believed to be the second highest in the process. The Varde-Arena consortium wrote to Srei administrators on Thursday, calling the ongoing corporate insolvency resolution process (CIRP) “unreasonable, unfair, sloppy and employing an ad hoc proprietary challenge method for a short period”.

In the letter, the consortium also accused the administrators of “unreasonably hastily rushing through the entire challenge process” because it took place in a brief period of one week without regard to asking for sufficient time in advance. The consortium sought more time to evaluate, considering the Christmas and New Year holidays. In the letter, the consortium also requested the administrator to update the Committee of Creditors (CoC) on all these issues in the interest of all stakeholders.

Varde focuses on corporate and transactional credit, real estate and financial services, managing more than $13 billion in assets in North America, Europe and Asia Pacific. Arena Investors is a global institutional asset manager with $3 billion in assets under management.

The issue of the Varde-Arena consortium submitting a revised bid is like debt-laden Reliance Capital’s (RCap) bankruptcy proceedings. In December, Hinduja Group revised its bid for RCap to Rs 9,000 crore, well above Torrent Group’s highest bid of Rs 8,640 crore. The revised bids come after the e-auction closed on December 21, with Gujarat-based Torrent Group taking the top bid of Rs 8,640 crore to acquire all RCap’s assets.

Subsequently, Torrent, in a letter to the administrator, termed the move a “blatant and arbitrary violation” of the challenge process and later moved the Mumbai Bench of the National Company Law Tribunal (NCLT). On January 3, the NCLT directed the lenders to RCAP not to accept the revised offer of Hinduja Group until further orders and posted the matter for further hearing on January 12. In a significant order in 2018, the National Company Law Appellate Tribunal (NCLAT) ruled that the insolvency process was aimed at extracting maximum value from the auction of stressed assets, allowing UltraTech Cement’s revised bid of Rs 7,900 crore to acquire debt-Ladden Binani Cement. Binani Cement’s CoC declares the Rs 6,930 crore bid of Rajputana Properties (owned by Dalmia Bharat) as the highest and decides to consider a better bid from UltraTech after filing with the Kolkata bench of bankruptcy court for its approval.