SBI seeks counter bids to sell Rs 52k cr of consortium's loans in JAL

NARCL's anchor bid has triggered a Swiss challenge auction

State Bank of India (SBI) has invited counter bids from entities interested in acquiring bad debt of Rs 52,074 crore in Jaiprakash Associates Ltd (JAL) through a Swiss challenge auction, triggered by an anchor bid from state-owned National Asset Reconstruction Company Ltd. (NARCL).

 

NARCL has made an offer of Rs 12,000 crore to acquire the debt of 25 lenders on a 15:85 cash: security receipts basis.

 

NARCL’s anchor bid would translate into a recovery of 23 per cent for the lenders.

 

Previously, NARCL had offered Rs 10,000 crore to take over the lenders debt in the company but it upped its offer to Rs 12,000 crore subsequently.

 

 

Other lenders in the consortium include: ICICI Bank, IDBI Bank, Axis Bank, Canara Bank, Punjab National Bank, Bank of Maharashtra, Indian Overseas Bank, UCO Bank, Indian Bank, Bank of India, Central Bank of India, Standard Chartered Bank, Punjab & Sind Bank, South Indian Bank, J&K Bank, Karur Vysya Bank, IndusInd Bank, Exim Bank, Bank of Baroda, Union Bank of India, Life Insurance Corporation, SIDBI, and IFCI.

 

Among the lenders, SBI has the highest exposure with Rs 15,464 crore, followed by ICICI Bank with Rs 10,443 crore, IDBI Bank with Rs 8,718 crore, LIC with Rs 3,021 crore, and Axis Bank with Rs 3,084 crore.

 

IDBI Capital Markets & Securities Ltd. has been appointed as the process advisor on behalf of the consortium of lenders for the sale process.

 

Entities interested in acquiring the bad loans of JAL must submit their expressions of interest (EoIs) by December 16 and complete due diligence by January 6.

 

A Swiss challenge auction is scheduled for January 8, during which any counterbids must exceed the anchor bid of Rs 12,000 crore by at least Rs 600 crore. The counterbids have to be on an all cash basis.

 

If there are any counterbids, NARCL will have the option to either match the counter bid or submit a higher bid. However, if no counter bids are received during the Swiss auction process, NARCL’s anchor bid will be declared the successful bid.

 

JAL was part of a list of 30 companies that were directed by the Reserve Bank of India to be referred to the National Company Law Tribunal (NCLT) in August 2017. This was the second list put together by the regulator, and Jaypee Infratech, the group’s infrastructure subsidiary, had already featured on the first list of 12 large corporate accounts for immediate insolvency action in June 2017, a list that came to be known as “The Dirty Dozen”.

 

If NARCL manages to acquire JAL, it will be the biggest acquisition for the state-owned asset reconstruction company since its inception. NARCL has been on an asset acquiring spree in the current financial year (FY25). 

 

Incorporated in 2021, with majority stake held by public sector banks and the balance by private sector lenders, NARCL has the mandate to acquire fully provisioned stressed assets from banks.

 

NARCL acquires stressed debt on a 15:85 cash-to-security receipts structure. NARCL has been set up with a strategic initiative to clean up the legacy stressed assets with an exposure of Rs 500 crore and above in the Indian banking system.

 

NARCL is eyeing stressed debt acquisitions totalling Rs 1.25 trillion. Of the Rs 1.25 trillion, evaluations for assets valued at around Rs 40,000 crore are currently underway, the Economic Survey for 2023-24 had stated. As of March 2024, NARCL has acquired stressed debt from 18 accounts worth Rs 92,000 crore.

 

An email sent to NARCL did not elicit a response till press time.