Setback For AGI Greenpac As Supreme Court Junks HNG Revival Bid, Stock Falls

AGI Greenpac Ltd.'s resolution plan for the acquisition of insolvent Hindustan National Glass Ltd. is unsustainable and has to be set aside, the Supreme Court has held.

A three-judge bench of the top court comprising Justices Hrishikesh Roy, Sudhanshu Dhulia, and S.V.N Bhatti stated that any action that may have been taken after the resolution plan was approved by the committee of creditors will be nullified. "The approval by the committee of creditors has been set aside," the top court said.

The court further stated that the committee of creditors will have to consider resolution plans that had the competition regulator's approval prior to the date on which AGI's plan was approved. In essence, only Independent Sugar Corporation's plan will be considered by the committee.

At the heart of the matter lay the issue of interpretation of a particular provision, section 31(4), of the IBC.

Section 31(4) says that in cases of combination, the Competition Commission of India 'shall' approve the acquirer's resolution plan before it can be put to vote by the committee of creditors, or CoC.

A combination, under the Competition Act, refers to the acquisition of control, shares, voting rights, or assets in an enterprise engaged in a competing business, or when mergers and amalgamations between or among enterprises exceed certain thresholds set out in the Act.

The top court said that section 31(4) is mandatory in nature and categorically stated that CCI's approval must be obtained before the CoC can vote on resolution plans that pertain to combinations.

Hindustan National Glass, or HNG, is one of India's oldest names in the container glass market. HNG was admitted into insolvency in October 2021, and its resolution has since then been marred by various controversies.

Post its admittance into the corporate insolvency resolution process, two primary bidders surfaced for HNG’s acquisition. Independent Sugar Corp., or INSCO, and AGI Greenpac Ltd.

Both potential acquirers submitted their respective bids in April 2022.

INSCO got the competition regulator’s nod in September 2022. However, it was AGI’s plan that received a go-ahead from the CoC in October 2022. It is crucial to note that AGI did not have the competition regulator’s nod at this point in time.

Both, the NCLT and NCLAT, had ruled that while CCI approval is ‘mandatory,’ it doesn't necessarily have to precede CoC approval. Both tribunals said that this condition is only ‘directory’ in nature.

This prompted INSCO to move the apex court for a final and decisive verdict in the matter.

Following the development, shares of AGI Greenpac fell as much as 18.90% to Rs 762 apiece, the lowest level since Aug. 12. They pared loss to trade 17.30% lower at Rs 777.10 apiece, as of 12:10 p.m. This compares to a 0.70% advance in the NSE Nifty 50.

The stock has fallen 0.03% in the last 12 months. Total traded volume so far in the day stood at 11 times its 30-day average. The relative strength index was at 27 indicating it is oversold.

The one analyst tracking the company maintains a 'buy' rating, according to Bloomberg data. The average 12-month analysts' consensus price target implies an upside of 132.3%.