India’s state-sponsored bad bank is set to make its first distressed-debt acquisition since its formation a year ago. The National Asset Reconstruction Co (NARCL) emerged as the winning bidder for the debt of Jaypee Infratech at Thursday’s Swiss challenge auction after lenders failed to draw counterbids, two people aware of the development told.
Lenders expect to close the transaction by the first week of November. It will involve NARCL acquiring ₹9,234 crore of stressed loans. In the first week of October, NARCL gave a ₹3,570-crore binding bid for the loans held by public sector banks, triggering a Swiss challenge auction.
“Lenders received a few expressions of interest (EoI), but none of them followed up with a firm offer,” said one of the persons cited above. NARCL’s offer would imply a recovery of 39% for lenders.
A Swiss challenge auction gives anchor bidder – NARCL in this case – first right to match counterbid, if any.
Phoenix ARC, Aditya Birla ARC and ARCIL were among some of the stressed-asset buyers that submitted expressions of interest for Jaypee Infratech, the first person said.
More than 24,000 homebuyers, fixed deposit holders and private lenders of Jaypee Infratech, which constitutes 62% of verified claims, are excluded from the offer made by NARCL, as it aims to acquire debt of only the PSU lenders. The share of PSU banks is 38% of the total financial creditors’ claims.
The sale of bad loans to NARCL kicked off following a directive by senior finance ministry officials to bank chiefs at a closed-door meeting held in mid-September. The meeting was chaired by Sanjay Malhotra, secretary of the department of financial services, and attended by Dinesh Khara, chairman of State Bank of India, among other bank CEOs, as reported on September 19.
During the meeting, Malhotra asked lenders to sell 18 accounts totalling ₹39,921 crore to NARCL by the end of October.
“It was an ambitious target to achieve since October has several holidays due to the festive season, but NARCL has accelerated the pace of its activity,” said a bank official.
NARCL’s offers to lenders for Mittal Corp, SSA International, and Consolidated Construction Consortium have triggered Swiss auctions. NARCL has also given a binding offer for acquiring the debt of Rainbow Papers and Meenakshi Energy.
