NARCL to step up acquisitions of distressed assets in FY24

The government-promoted National Asset Reconstruction Co Ltd (NARCL) will step up the pace on the acquisition of distressed assets this fiscal year even though it missed a self-imposed target of buying loans worth ₹50,000 crore in FY23, said people aware of the development.

NARCL, sponsored by state-owned banks, acquired ₹10,378 crore outstanding loans last fiscal year from Jaypee Infratech, SSA International and Helios Photo Voltaic Ltd, about one-fifth of the target. All three loans were acquired for a consideration of ₹3,636 crore.

In FY24, the bad bank will most likely acquire ₹30,000 crore of Srei Equipment Finance and Srei Infrastructure Finance loans, subject to approval by the adjudicating authority.

While lenders have approved its ₹5,555 offer as a resolution applicant, it’s been challenged at the National Company Law Tribunal (NCLT) by promoter Hemant Kanoria, who has made a counteroffer.

Other big-ticket acquisition plans include ₹600 crore offered to Rolta India’s secured lenders for their admitted claims of ₹7,086 crore.

The military-focused software developer was admitted to the bankruptcy court after its management escaped insolvency thrice in the last four years.

NARCL last month offered to acquire the loans of Vidarbha Industries Power, an Anil Ambani group company, for ₹1,150 crore, although lenders are yet to approve the offer. Vidarbha’s lenders faced a setback last year after a landmark Supreme Court order overturned a National Company Law Tribunal’s decision to start bankruptcy proceedings, stating that other factors leading to the default were not considered.

Another acquisition that’s lined up is the ₹619 crore debt of Dharani Sugars and Chemicals for ₹222 crore after an uncontested Swiss auction on March 17.

Dual structure relationship
Separately, lenders will soon hold a Swiss auction to sell Rainbow Papers based on an ₹87 crore anchor offer by NARCL for the company’s loans.

State Bank of India (SBI) chairman Dinesh Khara had informed the media in early 2022 that NARCL would acquire 15 accounts with ₹50,000 crore loans during FY22. Banks had identified 38 accounts for sale to NARCL with ₹82,845 crore debt, he had said at that press briefing on January 28 of that year. But NARCL’s operations were delayed due to a lack of clarity on the dual structure relationship between NARCL and India Debt Resolution Co Ltd (IDRCL), leading to leadership issues. Due to this, NARCL extended its ₹50,000 crore target to FY23, the people cited above said. NARCL and IDRCL now have a principal-agent relationship.

All the offers by NARCL have a 15:85 structure – 15% of the consideration is paid upfront and the remaining 85% is paid on the recovery of dues. The government guarantees any shortfall in the promised recovery as announced in the budget for FY21.

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