MUMBAI: State Bank of India (SBI), ICICI Bank and IDBI Bank hold the key to the Jaiprakash Associates (JAL) insolvency resolution with admitted claims of more than Rs 51,000 crore, one of the biggest cases since the Insolvency and Bankruptcy Code (IBC) came into force in 2016.
Updated claims as of end July show that financial creditors including homebuyers are owed a total of Rs 51,510 crore led by SBI which with close to Rs 15,500 crore is the largest creditor with 30% of the debt followed by ICICI Bank with 18% and IDBI Bank with 11%. All three together hold close to 60% of the debt and adding LIC’s 6%, make the 66% vote needed to approve a resolution.
Bankers said consolidation of debt with these three creditors could help quicken decision-making for the resolution of an account which has been admitted to insolvency after a six-year delay.
“Firstly, creditors are relieved that finally this case has seen the light of the day. This is a complex resolution so it is still early days, but importantly there are assets on the ground and with three-four creditors holding most of the debt most other lenders are likely to rally around them,” said a person familiar with the process.
JAL was among 26 defaulters that the Reserve Bank of India (RBI) had directed to be taken to the bankruptcy proces in 2017. ICICI Bank had filed an insolvency petition against the company before Allahabad Bench of the NCLT in 2018 which was finally admitted in June giving lenders some hope for recovery.
JAL’s assets include operating cement plants with capacity of over 9 million tonnes; real estate around the Yamuna Expressway Industrial Development Area (YEIDA); hotels in Delhi, Noida, Mussoorie and Agra; EPC business, power plants, a hospital in Noida and the Buddh International Circuit-the only Formula One track in India.
Lenders are hopeful but guarded on their expectations from these assets amid expected litigations from promoters, disputes with state government agencies like YEIDA and also multiple charges on assets.
“Initial interest is good and formal expressions of interest (EOIs) will come in the next few weeks. Lenders will of course look to maximise their recovery. But with all these assets there could be also litigations and scrapping of agreements with agencies like YEIDA which lenders will have to contend with. An enterprise valuation has still not been done and the resolution professional has to be ratified by the committee of creditors (CoC) but with some large corporate groups showing preliminary interest there could be some value for lenders,” said a second person aware of the process.
Bhuvan Madan has been appointed as an interim resolution professional. EOIs from interested parties are expected till next month.
Lenders are also wary of litigation by JAL promoters after having stalled the process since last seven years despite being among 26 defaulters specifically directed by the RBI to bankruptcy.
Earlier this week ET reported that the company had approached the appellate tribunal seeking a stay on the bankruptcy process but the court refused to intervene before hearing from creditors.
