Infra companies consider monetising litigation claims for offshore assets

HCC and Punj Lloyd are two infra companies with claims outside India.

Infrastructure companies are looking at monetisation of litigation claims for their assets abroad. 

There have been at least two instances of monetisation of domestic claims, by Hindustan Construction Company (HCC) and Patel Engineering. After which, said Deepto Roy, partner with law firm Shardul Amarchand Mangaldas, companies are exploring the same option overseas.

Under this, infra companies would transfer their interest in pending claims with various agencies to a third party, in return for upfront payment. “We have been approached by a few companies in India for overseas claims,” said Ravi Chachra, chairman and managing partner, Eight Capital. 

HCC and Punj Lloyd are amongst multiple other infra companies with claims outside India. An e-mail query to HCC on whether the company looks to monetise claims abroad was not answered.
 

In the case of Punj Lloyd, a a source said: “Assets are at various places in West Asia and not in use; these can be sold off post valuation. There is a proposal only to monetise overseas fixed assets, not any legal claims, subject to lender approval. Getting an approval from the committee of lenders is hard. All overseas arbitration claims are being kept alive for the successful Resolution Applicant.”

In March, HCC said it would raise Rs 1,750 crore through monetisation of claims through a transaction with BlackRock. This transaction was limited to the company’s domestic claims.

Arbitration systems abroad are different in some respects. “While claims in India arise from various concerns, like land and other issues, the case may not be similar outside India,” said Shubham Jain, vice-president at ratings agency ICRA. In addition, he said, the possibility of a favourable claim for a contractor overseas seemed lower. 

Eight Capital was an early mover for such a model in India. In 2017-18, Patel Engineering transferred a chunk of its actionable claims and certain other real estate asset rights, amounting to Rs 2,168 crore, along with corresponding debt and liabilities, to a Special Purpose Vehicle in which 51 per cent equity was picked up by an Eight Capital group entity. 

In the past two years, Chachra said, Eight Capital has acquired close to Rs 4,200 crore in domestic claims. It has created a fund dedicated to claims in India; however, it is not keen on offshore claims of Indian Infrastructure companies. "We are currently evaluating more domestic claims from other infrastructure companies," Chachra said.