Creditors owed Rs 2,000 crore by an insolvent steel company must choose between Rs 900 crore upfront and a plan paying Rs 400 crore upfront, Rs 800 crore over four years and 10% of the reorganised equity valued at Rs 1,500 crore. Discount at 12%. Which plan, and what are they really voting on?

Plan B is worth about Rs 1,157 crore today against Plan A's Rs 900 crore, a 58% recovery against 45%, but Rs 757 crore of it depends on the reorganised company paying and the equity being worth what the applicant says. Plan A wins only if the deferred pieces lose more than 34% of their value, for instance if instalments stop after two years and the equity is worthless. The vote is on that probability, not on the arithmetic.

Bring every rupee to today. Plan A is Rs 900 crore. Plan B is Rs 400 crore now, plus four instalments of Rs 200 crore worth Rs 607 crore at 12%, plus Rs 150 crore of equity, Rs 1,157 crore in total. Someone who sold you a car and offered Rs 9 lakh now or Rs 4 lakh now and Rs 2 lakh a year for four years plus a share in their taxi business is making the same offer: the second is bigger on paper and depends on the taxi running. On face value Plan B is Rs 1,350 crore; the discount rate removes Rs 193 crore before a single risk is considered. Both plans sit far above the Rs 700 crore liquidation value, which is why the committee has a real choice.

All of the lead, and some of the base. Plan B beats Plan A by Rs 257 crore, but Rs 757 crore of it is deferred, so the deferred pieces can lose up to 34% of their value before Plan A was the better choice. Run the cases. If the equity turns out worthless, Plan B is still Rs 1,007 crore. If the equity is worth half the applicant's number, Rs 1,082 crore. If the reorganised company pays two instalments and then fails, with the equity gone, Plan B is Rs 738 crore, below Plan A. Raising the discount rate to 20% to reflect the credit risk of a company that has just been through insolvency leaves Plan B at Rs 1,068 crore, still ahead.

On whether a steel company that just failed will generate Rs 200 crore a year for four years, and whether a fund's valuation of its own equity is worth believing. The arithmetic cannot answer that; the plan's business case can. Ask what EBITDA the Rs 200 crore needs, whether the instalments are secured on the plant and rank ahead of the fund's own return, and whether the 10% equity carries tag-along and information rights or is a minority stake in a private company with no exit. A resolution planThe proposal of a bidder for taking over an insolvent company, setting out what each class of creditor receives and how the business will be run. that offers equity is also asking creditors to stay invested; a bank that needs to clear the loan from its books may rationally prefer Rs 900 crore now to Rs 1,157 crore of mostly paper.

State the framework and its limits. Under India's insolvency code the committee of creditors votes on plans by value of debt, a plan needs a supermajority to pass, dissenting creditors are protected to at least liquidation value, and the process runs to a statutory timeline; confirm the current thresholds and timelines before advising, because they have been amended more than once. The judgement: Plan B on value, with the instalments secured and the equity protected; Plan A if the committee cannot verify the fund's business case or needs the money off its books now. The limit of the analysis is the 12%: a rate chosen for a performing company understates the risk of one emerging from insolvency, and the discount rate at which Plan B, with its equity still counted at Rs 150 crore, falls to Plan A's Rs 900 crore is about 44%.