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National Asset Reconstruction Co (NARCL) has raised its offer to INR 12,000 crore for the INR 54,000 crore debt of Jaiprakash Associates (JAL), despite the company's ongoing insolvency appeal at the National Company Law Appellate Tribunal (NCLAT). The bid includes a 15% upfront payment and 85% in government-guaranteed security receipts. JAL's assets, including cement plants, real estate, and hospitality ventures, are key to resolving India's second-largest insolvency case. With delays and promoter litigation, creditors may prefer NARCL's streamlined debt consolidation. The revised bid marks a significant step towards resolving this prolonged bankruptcy case under the IBC framework.
The government-backed bad loan aggregator, National Asset Reconstruction Co (NARCL), has increased its offer to take over the INR 54,000 crore debt of Jaiprakash Associates (JAL), despite the company's pending appeal against its admission into insolvency before the National Company Law Appellate Tribunal (NCLAT). Advertisement
NARCL's new bid of INR 12,000 crore follows an earlier offer of INR 10,000 crore made in March. The updated offer includes an upfront payment of INR 1,800 crore, or 15% of the total debt, with the remaining 85% in the form of security receipts, which are guaranteed by the government for five years, a distinctive feature of NARCL's approach.
Sources close to the matter revealed that the revised offer was made after NARCL completed its own valuation exercise. The revised proposal came shortly before Diwali, providing greater clarity, as the majority of creditor claims are now known. However, banks are yet to meet to discuss the new offer.
Jaiprakash Associates' resolution is the largest insolvency case since the enactment of the Insolvency and Bankruptcy Code (IBC) in 2016, surpassed only by the INR 65,000 crore owed by Videocon Industries. The assets of JAL include operational cement plants, real estate near the Yamuna Expressway Industrial Development Area (YEIDA), hotels in Delhi, Noida, Mussoorie, and Agra, as well as a hospital in Noida and the Buddha International Circuit.
The Interim Resolution Professional, Bhuvan Madan, has already admitted claims from 31 creditors. State Bank of India (SBI) is the largest creditor, with claims close to INR 15,500 crore, followed by ICICI Bank with INR 10,500 crore. Both banks are conducting their own valuations of the company, which will serve as a basis for their negotiations with NARCL.
While JAL's assets could be monetised, the long delays and ongoing litigation from promoters may lead creditors to consider selling the company's debt to NARCL. This would consolidate the debt under one creditor, streamlining the process and potentially speeding up the resolution.
The offer from NARCL comes as NCLAT reserved its order on JAL's appeal against the National Company Law Tribunal's (NCLT) decision to initiate insolvency proceedings, which itself followed a six-year delay after ICICI Bank filed the insolvency plea in 2018. In 2017, the Reserve Bank of India (RBI) had directed that JAL, among 26 other defaulters, be taken into bankruptcy proceedings. Despite concerns over judicial delays, creditors may view NARCL's offer as a viable solution to expedite the process.
The revised offer from NARCL presents a potential resolution to the prolonged insolvency case, which could streamline the process and expedite creditor recovery, despite the ongoing legal complexities.
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