Jaiprakash Power: Banks invoke SDR

Lenders of Jaiprakash Power Ventures have invoked strategic debt restructuring (SDR) on Monday to acquire a significant stake in the company and convert part of its ballooning debt into equity.

As of March 31, Jayprakash Power had a debt of Rs 22,400 crore. The company, a 60.69 per cent subsidiary of Jaiprakash Associates, had been struggling to repay its debt. The move will help prevent the loan exposures from becoming non-performing assets.

On Monday, the company informed the BSE that the lenders had recommended SDR after reviewing the plan to pare debt. Following this, the shares of the company rose 6 per cent to trade at Rs 6.5 a piece.

The move gives lenders the power to turn loan into equity and, at a later date, bring in strategic investors by selling their stake, to recover dues. Senior public sector bank executives said the company was trying to sell off a few of its operating power projects. But, that would take time.

Banks, especially public sector lenders reeling from bad loans, are worried about further slippages. Though loan is “standard” for now, risks are high. There have been delays in payments, though the company has not breached the 90-day norm.

“The only option was to go for SDR, to protect the present status of the account and avoid a hit on the bottom-line,” said the head of recovery of a Mumbai-based bank.

Bankers said the economy was in a growth mode and a slew of policy steps would improve situation in power sector. This should help negotiate with prospective investors in the future.

CARE Ratings had downgraded rating for JP Power’s long-term loans from “B” to “D”, a default grade indicating a precarious situation. The company reported a net loss of Rs 294.5 crore on operating income of Rs 3,883.68 crore in FY16 as against net profit of Rs 137.21 crore on operating income of Rs 3,944.13 crore in FY15.   

JP Power has a presence in the power transmission business through its 74 per cent subsidiary Jaypee Powergrid, which has set up a 214-km transmission line.

The company, through its subsidiary Prayagraj Power Generation Ltd (PPGCL), has 1,980-MW thermal power project in Bara, Uttar Pradesh, of which 660-MW capacity is operational and rest is under implementation. JPVL has also commissioned 2 MTPA cement grinding unit at Nigrie in June 2015.

  Lenders have already also invoked SDR for Jaiprakash Associates, as they had time only till June 30 to treat it as a standard asset, while the sale process continued.  It has finalised a deal to sell cement units to UltraTech Cement, an Aditya Birla group entity.

It was to help lenders protect status of accounts for the next 18 months.

The Jaiprakash Associates’ account became a non-performing asset on the books of the State Bank of India last financial year. There are over 30 lenders to the company which can keep the account standard now since the SDR has been invoked.Jaiprakash Power: Banks invoke SDR


Abhijit Lele
Mumbai, 27 July

Lenders of Jaiprakash Power Ventures have invoked strategic debt restructuring (SDR) on Monday to acquire a significant stake in the company and convert part of its ballooning debt into equity.

As of March 31, Jayprakash Power had a debt of Rs 22,400 crore. The company, a 60.69 per cent subsidiary of Jaiprakash Associates, had been struggling to repay its debt. The move will help prevent the loan exposures from becoming non-performing assets.

On Monday, the company informed the BSE that the lenders had recommended SDR after reviewing the plan to pare debt. Following this, the shares of the company rose 6 per cent to trade at Rs 6.5 a piece.

The move gives lenders the power to turn loan into equity and, at a later date, bring in strategic investors by selling their stake, to recover dues. Senior public sector bank executives said the company was trying to sell off a few of its operating power projects. But, that would take time.

Banks, especially public sector lenders reeling from bad loans, are worried about further slippages. Though loan is “standard” for now, risks are high. There have been delays in payments, though the company has not breached the 90-day norm.

“The only option was to go for SDR, to protect the present status of the account and avoid a hit on the bottom-line,” said the head of recovery of a Mumbai-based bank.

Bankers said the economy was in a growth mode and a slew of policy steps would improve situation in power sector. This should help negotiate with prospective investors in the future.

CARE Ratings had downgraded rating for JP Power’s long-term loans from “B” to “D”, a default grade indicating a precarious situation. The company reported a net loss of Rs 294.5 crore on operating income of Rs 3,883.68 crore in FY16 as against net profit of Rs 137.21 crore on operating income of Rs 3,944.13 crore in FY15.   

JP Power has a presence in the power transmission business through its 74 per cent subsidiary Jaypee Powergrid, which has set up a 214-km transmission line.

The company, through its subsidiary Prayagraj Power Generation Ltd (PPGCL), has 1,980-MW thermal power project in Bara, Uttar Pradesh, of which 660-MW capacity is operational and rest is under implementation. JPVL has also commissioned 2 MTPA cement grinding unit at Nigrie in June 2015.

Lenders have already also invoked SDR for Jaiprakash Associates, as they had time only till June 30 to treat it as a standard asset, while the sale process continued.  It has finalised a deal to sell cement units to UltraTech Cement, an Aditya Birla group entity.

It was to help lenders protect status of accounts for the next 18 months.

The Jaiprakash Associates’ account became a non-performing asset on the books of the State Bank of India last financial year. There are over 30 lenders to the company which can keep the account standard now since the SDR has been invoked.