Lenders reject JSW Energy offer for Monnet Power citing poor terms

JSW wanted to repay debt over next 20 years; Monnet to now go for liquidation

Lenders to Monnet Power have rejected the lone bid from JSW Energy, citing poor terms of the offer. 

“Monnet Power will go for liquidation as the bid made by JSW Energy has been rejected by 90 per cent of the lenders. JSW wanted to make the payment over the next 10 years, which was not accepted,” a source in the know of the development said. Besides, the upfront cash offer of Rs 500 million in itself was not good enough, the source said. The total offer was Rs 5 billion. A JSW Energy spokesperson declined to comment. 

In July, the Sajjan Jindal-owned firm had acquired Monnet Ispat, which was in the first list of assets identified by the RBI for debt resolution under the Insolvency and Bankruptcy Code (IBC), 2016. After defaulting on debt worth Rs 35 billion, Monnet Power, too, found its place in the second list of assets identified by the RBI in December 2017.

With yet another failure, lenders are staring at an abyss with stressed assets going insolvent instead of being rescued. They are taking haircuts of 50 per cent and more for lending to the 1,000-odd assets sent to the NCLT for resolution. 

In the case of Monnet Ispat, its top lenders — State Bank of India (SBI), Punjab National Bank, UCO Bank and IDBI Bank — might have to write off the entire amount loaned to the firm. Monnet Power runs a 1,050 Mw thermal power unit in Odisha and supplies to Monnet Ispat. The project was set up the Jajodia family, relatives of the Jindals. Both of Jajodia’s companies — Monnet Ispat and Monnet Power — defaulted as on March 2017, leading to insolvency proceedings against them. The annual report of Monnet Power for fiscal 2017 (the last available) shows poor financial results. It showed Rs 9.4 million of revenues and the loss was Rs 265 million. 

Till date, lenders have received 100 per cent offer only in the case of Binani Cement — acquired by UltraTech Cement — and in the case of Essar Steel, from the promoters. 

The Essar Steel and ArcelorMittal offer is still pending with the NCLT. 

Lenders said the worst is yet to come as they are sitting on Rs 1.8-trillion debt to power projects that are on verge of becoming non-performing assets. 

A February 12 circular issued by the RBI had banned loan restructuring of projects in India. This led to several power projects becoming unviable. A petition filed by the Association of Power Producers is pending in the Supreme Court and is expected to be taken up in January.

Tata Power won the race to take over Prayagraj Power, owned by the Jaypee group. Prayagraj had defaulted on debt worth Rs 110 billion.

IBC has been mired in controversies from day one. Continuous amendments further complicated the matter. Corporate lawyers said changes in the law to keep the promoters and their relatives out of the process saw many erring promoters losing control over their assets. The government is now said to be planning to tweak the Section 29A of the IBC so as to allow relatives of a promoter to bid.