Government-owned ARC on Friday informed lenders that it has prepared two lists – Phase I comprising eight accounts with debt of Rs 16,744 crore and Phase II comprising 10 accounts with debt of Rs 18,177 crore, people said. Huh. NARCL has appointed consultants such as EY, PwC, alvarez And Marshall, KPMG, asked Grant Thornton to do due diligence for the 18 accounts, he said. It will depend on the due diligence report to finalize the binding proposals for these accounts.
The third list will be released soon which includes Twin Srei companies, some Future Group companies and VOVL, the oil and gas exploration company of Videocon Industries, people said. NARCL did not respond to ET’s queries.
Jaypee Infrastructure, Meenakshi Energy, Mittal Corp., Rainbow Papers And integrated construction The company is one of the eight Phase I companies.
Coastal Energy, Rolta and McNally are part of Bharat Engineering Phase II.
In last week’s meeting, finance ministry officials told lenders that the bad bank was set up following demands from lenders and thus they should cooperate with NARCL to expedite the sale of loans. The meeting was presided over by Sanjay Malhotra, Secretary, Department of Financial Services. State Bank Of India Chairman Dinesh Khara and others.
Helios Photo, SSA International and Sion Panvel Tollways are the other accounts in the first phase. Pioneer SAS Power, Pink City Expressway, Haridwar Highway, SEW Krishnanagar Baharampur Highway, Dharani SugarsMadurai Tuticorin Expressway and Seiya Industries Limited Step two is part of the list.
Last September, the cabinet approved a budgetary provision of Rs 30,600 crore as guarantee to encourage banks to sell loans to NARCL and clear their books. The guarantee will be operational only if NARCL fails to recover the money it has promised to pay to the lenders.
On receipt of a binding offer from NARCL, the lenders will seek the approval of their credit societies for selling the loan under the 15:85 structure. NARCL will pay 15% of the consideration in advance and issue security receipts for the 85% payable on recovery of the loan. Once the credit committee approves pricing on the loans, the lead bank will conduct a Swiss auction with NARCL being the first to match any counter offers.
NARCL’s urgency is partly because it has failed to obtain a single loan in a year of operation. Reserve Bank of India (RBI) rules stipulate that an ARC must close at least one deal within one year of commencement, failing which its license may be terminated. The Finance Minister had announced the formation of NARCL in the budget of 2020.
However, the delay in getting loans is largely due to the unique dual structure of NARCL, experts said. While NARCL will receive stressed loans from banks, Affiliated India Debt Resolution Company Limited (IDRCL) will be responsible for resolution of the loans.
The RBI initially opposed the model, but later approved it on the condition that NARCL and IDRCL agreed on a principal-agent relationship. NARCL will be the lead agency, while IDRCL will be its agent.