Lakshmi Precision Screws' creditors vote to liquidate the company
Five years into insolvency, the Committee of Creditors has approved liquidation. The case now heads to NCLT for a final order.
What's new
- Committee of Creditors approves liquidation of Lakshmi Precision Screws.
- Resolution Professional cites non-cooperation from former directors, files IBC application against them.
- Liquidation application filed with NCLT Chandigarh for adjudication.
Why this matters
Liquidation means the end of the road for a company that has been in CIRP since July 2018. Existing equity is virtually certain to be wiped out, and the company will be dissolved and delisted. For a ₹5 cr market cap stock, this is a terminal event.
What we're watching
- NCLT order on the liquidation application, expected to confirm the CoC decision.
- Any challenge or appeal by the former directors or other stakeholders.
- Process of asset sale and distribution to creditors, likely no residual for equity.
The full read
The Committee of Creditors of Lakshmi Precision Screws has approved liquidation, ending a five-year wait for a resolution plan. The company has been under CIRP since July 2018, and the Resolution Professional has cited persistent non-cooperation from former directors. A separate application against them under the IBC has been filed. The liquidation order now awaits the NCLT Chandigarh's nod, a near-formality for a company whose market cap is ₹5 crore and debt-to-equity ratio stands at 10.1. For equity holders, this is the final curtain. The company's assets will be sold to repay creditors, leaving nothing for shareholders. The stock is likely headed for delisting.
Questions answered
- What does the Committee of Creditors' approval of liquidation mean?
- It means the lenders have decided that revival of Lakshmi Precision Screws is not viable, and the company should be sold off in parts to repay debts. The final order rests with NCLT Chandigarh.
- When will equity shareholders lose their investment?
- Equity value is already near zero given the market cap of ₹5 cr and debt/equity of 10.1. Upon NCLT's liquidation order, shares will likely be delisted and become worthless.
- Can the company still be revived at this stage?
- Technically, the NCLT could reject the liquidation application or a resolution plan could emerge, but given the CoC has approved liquidation after five years of CIRP, revival is highly unlikely.
- Why has the insolvency process taken so long?
- The CIRP started in July 2018. The Resolution Professional noted former directors were non-cooperative, which contributed to delays and eventually led to an IBC application against them.