Vedanta questions evaluation metrics behind selection of Adani’s bid for JAL

The fight between Vedanta Group and Adani Group over Jaiprakash Associates Ltd is a deal in India.

The main question is:

Why did the lenders choose Adanis offer when Vedanta said theirs was better financially?

Vedanta is saying that the way the lenders picked Adanis plan was not fair.

They think it goes against the idea of getting the value out of the deal.

1. What happened with Jaiprakash Associates Ltd

Jaiprakash Associates Ltd, which’s part of the Jaypee Group had a lot of debt. Over ₹57,000 crore.

It has some valuable things like:

* Real estate projects in Noida and Greater Noida

* Cement plants

* Hotels

* The Yamuna Expressway

Because of these things Jaiprakash Associates Ltd was attractive to buyers even though it was struggling.

The companies that wanted to buy it were:

* Vedanta Group

* Adani Enterprises, which’s part of Adani Group

* Dalmia Bharat

In the end the lenders chose Adanis offer, which was around ₹14,535 crore.

Vedanta said their offer was around ₹16,000 crore.

2. The problem with how the lenders made their decision

When companies are in trouble the lenders do not just pick the offer with the money.

They use a lot of factors to decide, like:

* How much money they will get right away

* How long it will take to get paid

* If the plan is possible. Will work

* If the company making the offer can actually do what they say

* How much risk is involved

Vedanta is saying that the lenders did not weigh these factors correctly.

3. What Vedanta is complaining about

Vedanta told the National Company Law Appellate Tribunal that:

* The lenders ignored their offer

* The way the lenders scored the offers was not fair

* The lenders put much importance on some factors and not enough on others

* The process was not transparent

* The lenders misused their power to make a decision

4. Why the lenders chose Adani

The lenders said they chose Adani because:

* Adani offered money right away around ₹6,000 crore

* Adanis plan was to pay the money back faster in about 2 years

* Adani has experience with projects and can make them work

* The lenders wanted to minimize risk. Adanis plan seemed safer

5. Looking closer at the factors the lenders used

Lets break down each factor and how it affected the decision:

* Net Present Value: this is how much the money is worth today

* Upfront cash: how money the lenders get right away

* Payment structure: how the money will be paid back

* Feasibility and viability: if the plan is possible. Will work

* Equity infusion: how much money the buyer will put into the company

* Risk assessment: how much risk is involved in the plan

6. The role of the evaluator

The lenders hired a company called BTO India LLC to help evaluate the offers.

Vedanta said this companys method was not fair and did not follow the rules.

7. The fight in court

The courts had to decide if the lenders made the choice.

The National Company Law Tribunal said yes the lenders could choose Adani.

The National Company Law Appellate Tribunal let Vedanta appeal.

The Supreme Court of India said the case should keep going in the courts.

8. The main problem: value or certainty

This case is about a question: is it better to get the most value or to be sure you will get paid?

Vedanta said their offer was worth more. Adanis offer was more certain.

9. Other issues Vedanta is raising

Vedanta is saying that:

* The process was not clear

* The way the lenders scored the offers was not fair

* The bidding process was not fair

* The lenders misused their power

10. What the Insolvency and Bankruptcy Code says

The Code says that the main goal is to get the value out of the deal.

It also says that the lenders should consider how quickly they will get paid if the plan is possible and if the creditors will get their money back for sure.

11. What this means for everyone

This case is important for:

* Banks, because they want to get their money quickly and safely

* Companies, because they need to know how to make an offer

* Investors, because they want to know if the process is fair

* The government, because they need to make sure the rules are fair

12. What we can learn from this case

We can learn that:

* The highest offer is not always the winner

* Time is important when it comes to money

* The company making the offer needs to be able to follow through

* The lenders want to minimize risk

* The way the lenders score the offers can change the outcome

13. Looking at the decision closely

The lenders decision was good because:

* They wanted to be sure they would get paid

* They wanted to resolve the issue

* They wanted to minimize risk

But it was also bad because:

* They might have undervalued the company

* The process was not clear

* They relied much on the scoring model

The fight between Vedanta and Adani is not just about two companies.

It is a test of Indias rules for dealing with companies that’re in trouble.

Vedanta is asking if the lenders followed the rules and if they got the value.

The lenders are saying they made a decision.

In the end this case shows that in situations like this the best offer is not always the one, with the money. It is the one that is most reliable.