Model Evaluation Matrix

 

EVALUATION MATRIX

S.No.

Parameter

Score Matrix

Weightage

Max. Score

Calculation of Parameter

Rationale for Suggestion

Quantitative Factors

1

Upfront cash recovery

>=35% of the Resolution Debt Amount

10

300%

30

Measured as a percentage of the total financial creditor claims admitted by RP

Upfront cash recovery shall be defined as the payment proposed to be made to both financial creditors as well as operational creditors at the time of Closing of the Transaction or signing of the Definitive Agreements.
Performance Bank Guarantee (PBG) / Unconditional letter of commitment from Bank / cheque will need to be submitted by the RA, which shall be for the higher of the amount prescribed as Performance Bank Guarantee in the Process Document or the proposed Upfront Cash amount.

>=30% < 35% of the Resolution Debt Amount

8

>=20% < 30% of the Resolution Debt Amount

6

>=10% < 20% of the Resolution Debt Amount

4

>=5% < 10% of the Resolution Debt Amount

2

< 5% of the Resolution Debt Amount

1

No cash recovery

0

 

2

"Net Present Value" of
continuing debt
(inclusive of upfront
cash payment)

>=70% of the Resolution Debt Amount

10

150%

15

Measured as a percentage of the total financial creditor claims admitted by RP

This shall be computed by discounting the future cash flows to be paid to financial creditors by following a tiered discounting rate. Upfront cash payment, if any, shall be considered as part of NPV without applying any discount.
The discounting rate shall vary depending on the age bucket in which the cash flow falls.
The age buckets that shall be considered are as
follows:
· 0-5 years: 8%
· >5 years up to 10 years: 10%
· >10 years up to 15 years: 15%
· > 15 years: 30%
Note: - Intermediate values scored by linear interpolation

>=65% < 70% of the Resolution Debt Amount

9

>=60% < 65% of the Resolution Debt Amount

8

>=50% < 60% of the Resolution Debt Amount

6

>=40% < 50% of the Resolution Debt Amount

4

>=30% < 40% of the Resolution Debt Amount

3

>=20% < 30% of the Resolution Debt Amount

2

 
 

Discounted Value of Cash Flows from lender's equity and equity-like instruments

100% (maximum amongst all resolution)

10

50%

5

Measured as a % of maximum value amongst all resolution plans.  Cash flow from equity is assumed to be all in FY 21 (which is ten discounted).
Cash Flow from equity is calculated as per following formula:
% equity stake proposed for lenders * [(Projected FY 21 EBITDA as per resolution plan*Multiple) - outstanding debt in FY 21 - Minority interest (if any) + cash & cash equivalents]

------

90%

8

80%

6.4

70%

5.1

60%

4

50%

3.1

40%

2.3

30%

1.7

20%

1.1

10%

0.5

0% (no equity or like instruments given to lenders)

0

 

3

Equity upside for the financial creditors

>=10% of the Resolution Debt Amount

10

200%

20

--------

This shall be computed based upon the amount of equity infused and factoring the extent of shareholding proposed to be offered to
financial creditors.

>=8% < 10% of the Resolution Debt Amount

8

>=6% < 8% of the Resolution Debt Amount

4

>=4% < 6% of the Resolution Debt Amount

3

>=1% < 4% of the Resolution Debt Amount

2

No Upside

0

 

4

Equity infusion for
improvement of
business operations

>=15% of the Resolution Debt Amount

10

100%

10

--------

This shall be computed as the actual cash proposed to be infused by the RA in the Corporate Debtor for improvement of business perations in the form of Equity or Quasi-Equity within first 6 months from the date of signing of the Definitive Agreements plus discounted cash flows for infusion beyond 6 months, but up to 3 years, at a discount rate of 8% p.a. If the infusion is beyond 3 years, it will not be considered for scoring purposes.
Equity shall be defined as investment by way of Common Shares.     Quasi equity shall mean fund infusion by RA in the form of instruments, other than common shares, which meet the following criteria:
· Sub-ordinate to the secured loans
· Non-interest bearing
· No redemption without the consent of secured financial creditors
For the parameter to be considered in scoring, the RA (as defined below) has to clearly provide all the details relating to the sources of
available funds being used for the proposed equity infusion.

>=10% < 15% of the Resolution Debt Amount

8

>=5% < 10% of the Resolution Debt Amount

4

>=1% < 5% of the Resolution Debt Amount

2

No Infusion

0

 

5

Term of resolution plan (number of years after approval of resolution plan by NCLT)

Range 0-10

 

100%

10

-------

Bidder offering minimum number of years after approval of resolution plan by NCLT will get highest score and for other bidders the score will reduce by 20% against every year difference with highest bidder.

 

6

Fresh fund introduced (equity or debt) for the purpose of capital expenditure and working capital requirement

Range 0-10

 

100%

10

-------

Bidder introducing highest fresh funds will get a score of the highest and for other bidders the score will reduce by 10 against every 10% difference with highest bidder (rounding off would be done)

Maximum Marks

 

100

   

Total Weightage & Score

700%

70

   
 

Qualitative Factors

1

Experience of Resolution Applicants / Group in particular industry

Range 0-10

 

100%

10

------

The experience of resolution applicant would be important as this is a running concern and the experienced person will have higher possibility of successful revival of the unit. The score will be awarded by COC based on presentation by resolution applicant along with documentary evidences.

 

2

Financial strength of resolution applicant/group (group net worth, revenue, EBIDTA)

Range 0-10

 

200%

20

Debt to EDITDA Ratio - Ratio of net debt to EBITDA, as per audited financial statements for FY 17
Sales Turnover
- Total Sales Turover, as per audited financial statements for FY 17
Fund Size - Total investment proposed (including upfront cash and capital infusion) / Fund size (from which investment is proposed, as per the last audited financial statements)
Asset under Management - As per the last audited financial statement. Measured as a % of maximum value amongst resolution applicants

The financial strength of applicant would be important as the corporate debtor would need financial support for working capital and better utilisation of existing assets. The score will be awarded by COC based on presentation by resolution applicant along with documentary evidences.
For Strategic Investor - Debt to EBITDA ratio & Sales Turnover
For Financial Investor - Fund Size (from which investment is proposes) & Asset under management'

 

3

Reasonableness
of Financial
Projections and
feasibility of
honoring proposed
commitments

Range 0-10

 

300%

30

Confidence level on plan & projections, based on, but not limited to:
1. Asset Operations
2. Expension
3. Market Share
4. Synergies
5. Financing Plan

This shall be assessed based on various parameters including, inter alia, Sales, EBITDA, EBIT etc., and its Certainty / Likelihood / Feasibility / Eventuality of honouring proposed commitments.
This shall also refer to the reasonableness of the assumptions in the
business plan submitted by the RA and the assessment of risks and mitigations related to the implementation of the resolution plan including the plan for other stakeholders, viz. statutory authorities, employees and operational creditors.
An additional weightage of 10% on the amount arrived at after applying
quantitative parameters shall be assigned to this parameter.

 

4

Ability to turnaround distressed companies

Range 0-10

 

100%

10

Past success to be judged on EBITDA improvement (both absolute and % EBITDA margin) of acquired company, post acquisition

This shall refer to the years of operating experience that the RA has in similar industry. In case of an RA who is a financial investor, the assessment shall be made based on the entities in which the RA has a management control.
Further, this shall be assessed based on various financial parameters including, inter alia, Track record / experience of RA, Track record in M&A taking over and turning around distressed assets, etc.
The score will be awarded by COC based on presentation by resolution applicant along with documentary evidences.

 

5

Availability of additional collateral security and personal/corporate guarantee and value thereof

Range 0-10

 

50%

50

------

Additional collateral security, corporate guarantee and personal guarantee of resolution applicant, proposed management would provide additional comfort to lenders.

 

6

Standing of Bidder / External Rating

Range: 0-10
(Based on the track record of the Applicant)

 

100%

10

If multiple submitted, then highest rating considered.
If international rating submitted, then credit rating adjusted higher or lower as per difference in sovereign credit rating of country and India

This shall be assessed based on various parameters including, inter alia, external credit rating, turnover & asset under management (as applicable), collateral and adherence to financial Discipline / record of regulatory compliance.
The credit rating report should have been issued within the last 15 months from the date of submission of the resolution plan for the external credit rating to be valid for evaluation purposes.
India : CARE, ICRA CRISIL, Fithch / India Ratings
International: S&P, Moody's Fitch

 

7

Future Prospects

Range 0-10

 

100%

10

-------

A review of financial documents, industry trends and the state of the current economy helps with analyzing the future prospects of a company. A SWOT analysis is a commonly used tool for evaluating businesses. When the CoC votes to approve a resolution plan, it must not only consider the monetary value of the fund infusion offered by a resolution applicant, but also keep in mind a multitude of other factors to decide as to which resolution plan is best for the “future prospects” of the enterprise in question. This approach best serves the creation of a “rescue culture” in the legal system.

 

8

Risk assessment and mitigation plans

Range 0-10 (Based on confidence level)

 

50%

5

Confidence level on the plan.   All risks mentioned by the resolution applicants to be aggregated to form a complete list. Feasibilty of mitigation plan to be considered across each risk

Risk includes: 1. Sancity of raw material sourcing contracts 2. Compliances, including environment, land etc. 3. Plan for existing employess / union 4. Any other (TBD)

Maximum Marks   100    
Total Weightage & Score 30% 30    

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