Raj Radhe’s offer was in response to a Swiss challenge called by banks following the anchor bid by NARCL last month. This is the third offer received by banks in response to NARCL’s bids. It remains to be seen whether the government-backed bad loan aggregator exercises its option to beat its challenger.
Earlier this month, ET had reported that NARCL had refused to match Phoenix ARC Private Limited₹405 crore bid for bankrupt steel maker Mittal Corppaving the way for Kotak Mahindra Bank Backed ARC to take over the debt laden company.
Like the Phoenix offer, the Raj Radhe offer is on an all-cash basis unlike the 85% Security Receipts (SRs), which will be issued by NARCL and paid to banks only after realisation.
“The bidding closed last week and we have an offer. The ball is now in NARCL’s court,” said a person familiar with the process. Raj Radhe could not be immediately contacted.
To be sure, Raj Radhe’s enhanced offer also amounts to a recovery of 5% for lenders on the total outstanding amount of ₹2,623 crore. This is also lower than the promoter’s offer for settlement of ₹195 crore, which envisaged a recovery of 7.5% for the banks. “It is an EPC company with no real assets but may have claims and awards in the future, which may give some returns,” said a second person with knowledge of the process.
Some bankers have expressed concern about low NARCL bids, which could be easily topped by private ARCs and NBFCs and which may lead to promoters taking back control of companies through the backdoor.
“There is nothing stopping an NBFC from bidding for a company and handing it over to promoters as the rules are less stringent for NBFCs, unlike ARCs,” said a senior ARC official. “Even Section 29A does not apply to them. So they can only buy distressed loans under SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act), which gives them equal rights with banks and sells it to a third party.” Party, which may be the promoter. Only thing is, they can’t sell before six months.”
Some bankers said the low bids of NARCL have defeated the purpose of forming a national bad loan aggregator and opened up the possibility of manipulation as the loans are now consolidated.