I hold shares of Gujarat NRE Coke and the shares have been suspended from trading from today. I read that liquidation proceedings have been initiated by the National Company Law Tribunal (NCLT). Can someone explain what happens to the shares I hold? is there any chance me getting my money back?
Once the company decides to liquidate its assets, the liquidation value will be split between the debt and equity holders. But there is an order of priority here. The priority (who gets paid first) depends on the capital structure of the firm. Here is a generic example of the capital structure of a company -
- Senior secured debt holders
- Senior Debt
- Subordinate Debt
- Hybrid structure - (convertible debt etc)
- Preferential Equity
- Equity holders
So assume, the liquidation value is 100 Cr, this money will be split amongst all the above in the same order of prority. Lets put some arbitrarty numbers here -
- Senior secured debt holders ( 15Cr)
- Senior Debt (25 Cr)
- Subordinate Debt (20 Cr)
- Hybrid structure - (convertible debt etc) (30Cr)
- Preferential Equity (20 Cr)
- Equity holders - (80 Cr)
So, out of 100 Crs, 90 Crs, will be split between 1 to 4, Preferential Eq gets 10 Cr, and Eq Shareholders will get nothing.