“The NARCL offer came just last week and is being circulated to all lenders. Banks had already moved toward liquidation of the company in January last year but the promoter has also filed an intervening application offering a settlement,” said a person aware of the transaction. “There is still a lack of clarity on how the promoters will arrange funds and the payment timelines.”
The company was promoted by former Rajya Sabha MP T Subbarami Reddy and his family. The liquidation value of the company isn’t known yet, but typically EPC companies, with low asset ownership on their own books, don’t fetch high liquidation valuations.
The promoter’s offer under section 12A of the Insolvency and Bankruptcy Code (IBC) includes commitment to make good any losses creditors may incur due to the invocation of bank guarantees (BGs).
Banks are seeking a quick repayment timeline from the promoter with upfront cash payment within 90 days – not 180 days offered by them.
“Also, the promoters have offered to take care of BGs only after a nod by the NCLT. Banks would want this to be taken care of after the banks approve and not after NCLT approval,” said a second person aware of the details.The NARCL offer also includes some upside to banks in case there are some claims that are formally admitted later.”Banks are weighing both options. Now that the NARCL offer is there, banks can make a better choice because they would prefer to deal with a clean offer rather than get entangled with the promoters’ issues,” said the first person cited above.
NARCL did not respond to an email seeking comment.
To be sure, the Rs 750-crore offer by promoters even in the best case means a mere 8% recovery for creditors. Of the total dues, about Rs 2,775 crore is linked to guarantees given by the company. These include guarantees for distressed projects being executed by Gayatri – Indore Dewas Tollways and subsidiary Sai Maatarini Tollways. But these comprise a smaller portion of bank debt.
Both projects have been terminated by National Highways Authority of India (NHAI) with arbitration claims pending.
Canara Bank is the largest creditor with 23% of total dues totalling Rs 1,911 crore, followed by Bank of Baroda with 15% at Rs 1,382 crore.
Lenders moved NCLT in January for liquidation, rejecting the sole bid from private equity firm Mark AB Capital Investment LLC that offered Rs 650 crore, of which only Rs 50 crore was in cash upfront.
