Under the IBC, the RBI will Start the Resolution Process Against AVIOM India
Citing governance issues and payment defaults, the Reserve Bank of India (RBI) replaced the board of Aviom India Housing Finance on 27th January. Ram Kumar, a former Chief General Manager (CGM) of Punjab National Bank, was named administrator. In addition to applying to the National Company Law Tribunal (NCLT), New Delhi, to designate the administrator as the Insolvency Resolution Professional, the regulator stated that it "intends to shortly" begin the company's resolution procedure under the Insolvency and Bankruptcy Code (IBC).
The main business of Aviom is lending money for affordable housing. According to India Ratings, as of March 31, 2024, the promoter Kajal Ilmi and her family owned 31.4% of the company on a fully diluted basis. Other significant stakeholders included Nuveen (35.06%), Gojo and Company Inc. (19.84%), SABRE Partners AIF Trust (9.88%), and Capital 4Development Asia Fund Cooperative UA (3.78%).
What is the Insolvency and Bankruptcy Code?
A healthy credit flow and the creation of fresh capital are crucial in an expanding economy like India, and when a business becomes insolvent or "sick," it starts to fall behind on its loan payments. Banks or creditors must be able to collect as much as they can from the defaulter as soon as possible in order for credit to avoid becoming stuck in the system or becoming bad loans.
The company may be given the opportunity to start over with new owners if it is still viable, or its assets may be promptly liquidated or sold. In this manner, new credit may be added to the system, and asset value degradation can be reduced. The Insolvency and Bankruptcy Code (IBC) was introduced in 2016 to revamp India's corporate distress resolution regime and consolidate existing laws to create a time-bound mechanism with a creditor-in-control model instead of the debtor-in-possession system.
This was done at a time when India's non-performing assets and debt defaults were mounting and older loan recovery mechanisms like the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), Lok Adalats, and Debt Recovery Tribunals were perceived to be underperforming.
How Discrepancies Began in Aviom?
In the midst of allegations regarding irregularities that are being looked into, the company's statutory auditors discovered errors in its books of accounts. The National Housing Bank (NHB) has also been notified of a scam within the organisation. The business had also complained to the Economic Offences Wing (EOW). The business has been dealing with delayed interest payments and liquidity problems. It is being audited by a third-party forensic auditor that NHB has hired.
In the quarter that ended in March 2024, Aviom India Housing Finance's net profit decreased 14.09% to INR 6.34 crore from INR 7.38 crore in the quarter that ended in March 2023. In the quarter that ended in March 2024, sales increased by 58.94% year-over-year (Y-o-Y) to INR 117.38 crore, up from INR 73.85 crore in the quarter that ended in March 2023.
Nitin Konde
