MUMBAI: Lenders led by the State Bank of India have sought approval from the Reserve Bank of India to sell the ₹18,000 crore debt of realty company Jaiprakash Associates (JAL) to the National Asset Reconstruction Company of India (NARCL), said people with knowledge of the matter.
If the RBI approves the deal, it will become NARCL’s largest acquisition of the debt of a single company, with an offer of ₹10,000 crore to the lenders.
RBI’s approval is a condition precedent set by NARCL to acquire JAL’s loans, one of the people said. Lenders are seeking approval because in 2017, soon after the Insolvency and Bankruptcy Code (IBC) was enacted, the RBI directed banks to refer 28 companies, including JAL, for debt resolution under the Act. The company was on the second list of 28 accounts referred by the RBI for resolution under the IBC.
JAL is the flagship company of the Manoj Gaur-promoted Jaypee Group with an asset portfolio comprising cement, hospitality, real estate, fertiliser and construction businesses. In fiscal 2023, NARCL acquired 62%, or ₹9,234 crore, of Jaypee Infratech’s debt, offering lenders a 39% recovery following an uncontested Swiss challenge auction.
Although banks filed an application with the National Company Law Tribunal (NCLT) to initiate the debt resolution process for JAL around the same time, the company has not yet been admitted for the process due to a series of litigations.
In some companies among the 28 accounts referred by the RBI, such as Jayswal Neco and Jai Balaji, lenders have sold the debt to private asset reconstruction companies without seeking RBI’s approval.
However, lenders say JAL has a complex structure with several large businesses in one company. Thus, NARCL wants the central bank’s clearance for the acquisition to avoid getting caught in any regulatory crossfire, the people said.
If lenders sell debt to NARCL, the ARC will gain control of the cement division, the core land that houses the Buddh International Race Circuit that hosted the F1 Grand Prix more than a decade ago, five five-star hotel properties and a construction business.
SBI and ICICI Bank have separately filed petitions at the Allahabad NCLT to admit JAL for debt resolution. During the interim, Dalmia Cement (Bharat) in December 2022 made a binding offer at an enterprise value of ₹5,666 crore to acquire JAL’s clinker, cement and power units. Jaypee informed lenders that the funds would be used to settle a part of their debt.
The cement unit has a capacity of 9.4 million tonnes, while the clinker plant has 6.7 million tonnes, and the power plant, 280 MW. However, the deal has not yet concluded since lenders have not given a no-objection certificate.
NARCL has offered 15% as cash and the balance as securities receipts. This implies that NARCL will have to offer a cash component of ₹1,500 crore, while the balance of ₹8,500 crore would be security receipts, which would be redeemed as and when the ARC recovers the dues.
