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L&T Finance, a subsidiary of Larsen & Toubro, has initiated a bidding process to sell off bad debts amounting to Rs 3,022 crore to asset reconstruction firms. These debts are spread across ten accounts, with Nirmal Lifestyle Developers holding the largest debt of Rs 790 crore, followed by Supertech with Rs 515 crore and Nirmal Lifestyle Malls with Rs 251 crore. L&T Finance aims to reduce its wholesale finance portfolio, which includes real estate and infrastructure finance. The company had previously planned to collaborate with a private equity partner for its real estate ventures but did not receive regulatory approval.
L&T Finance has commenced a bidding procedure to dispose of bad debts valued at Rs 3,022 crore to asset reconstruction firms. These loans have been distributed among ten accounts, which include Supertech, Nirmal Lifestyle Developers, and Nirmal Lifestyle Malls. According to knowledgeable sources, Nirmal Lifestyle Developers has the biggest debt available for purchase, worth Rs 790 crore. Supertech follows with a debt of Rs 515 crore, while Nirmal Lifestyle Malls has a debt of Rs 251 crore.
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The lender has implemented a 15:85 arrangement in which they are seeking proposals from specific Asset Reconstruction Companies (ARCs). This arrangement involves L&T Finance retaining a maximum of 85 percent of Securities Receipts (SRs). Prospective buyers can express their interest until the beginning of next week.
L&T Finance intends to shrink its wholesale finance portfolio, which comprises infrastructure and real estate finance, and the decision is in line with its ongoing endeavours. Representatives of the company have said that it is uncertain which asset will be sold first, Stage 1 or Stage 2, as it has encountered difficulties managing both of its portfolios.
According to the management's recent call with investors, L&T Finance had envisioned a particular framework in place for real estate involving a private equity collaborator, but it did not gain regulatory consent. The difficulty in infrastructure financing lay in the fact that, despite partnering with an investment banker and locating a potential buyer, the buyer encountered challenges in securing adequate debt financing within the Indian market.
According to the management, the request to ensure the debt by L&T Finance went against the objective of selling the portfolio. As a result, L&T Finance has opted to dispose of its assets independently at a reduced price. The amount of funds in the wholesale finance book has plummeted to under Rs 20,000 crore. According to a report by ET, Phoenix ARC, backed by Kotak Mahindra Bank, acquired troubled loans valued at Rs 3,463 crore from L&T Finance in March 2022. The purchase was completed for a total of Rs 1,120 crore.
According to reports, L&T Finance and its subsidiary L&T Infra Credit have recently sold Rs 1,827.5 crore worth of troubled loans to Arcil, with Avenue Capital's support, for a price of Rs 1,092.5 crore in December 2022. The aforementioned deals were carried out following the 15:85 model, whereby 15 percent of the payment was made upfront and the remaining sum was settled using SRs.
During a recent call with investors, it was revealed that L&T Finance had a predetermined plan for real estate that involved teaming up with a private equity partner. However, they were informed that this particular arrangement did not comply with regulatory requirements.
Larsen & Toubro, an Indian company, specializes in executing EPC projects, manufacturing high-tech products, and providing services on a multinational scale. It has a presence in more than 50 countries across the globe. It ranks as one of the leading construction companies globally. The enterprise comprises a range of industries, including building and factory construction, transportation infrastructure, heavy civil infrastructure, smart technology and communication, water and renewable energy, and power transmission and distribution.
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