Tag: Videocon Oil Ventures

Companies that have had a shot at debt resolution under the Insolvency and Bankruptcy Code, including Videocon Oil Ventures and Reliance Naval, are among the first tranche of 22 non-performing accounts that are being sold to the National Asset Reconstruction Company (NARCL) by various lenders, according to a report.

State Bank of India (SBI) is planning to sell Videocon Oil Ventures’ bad loans of Rs 22,532 crore, while Union Bank of India plans to offload the Rs 9,000-crore Amtek Auto debt, the report said.

IDBI Bank is selling Reliance Naval and Engineering’s loans of Rs 8,934 crore while Union Bank is looking to sell the Rs 1,400 crore debt of Lavasa Corporation.

A consortium led by Mumbai-based industrialist Nikhil Merchant was leading the race to acquire the debt-laden Reliance Naval and Engineering Ltd, originally known as Pipavav Shipyard, with Rs 2,100 crore offer while another bid was of Rs 400 crore from the Naveen Jindal group.

In the case of Lavasa Corporation, the lenders are still undecided over the two offers received from Dhir Hotels and Resorts and Darwin Platform Infrastructure, with the last date of finalising a resolution being November 25. Lavasa Corporation has got bids worth Rs 700 crore for loan claims of over Rs 8,000 crore at NCLT.

Though banks have made 100% provision for the assets to be transferred to the bad bank, experts do not expect more than 20-25 per cent recovery from these legacy accounts.

The assets

Banks had identified Rs 82,496 crore worth of bad loans that could be transferred to the NARCL, which names like Videocon’s VOVL (Rs 22,532 crore total exposure), Reliance Naval and Engineering Ltd (Rs 8,934 crore), Amtek Auto (Rs 9,014 crore), Jaypee Infratech (Rs 7,950 crore, Castex Technologies (Rs 6,337 crore), GTL Ltd (Rs 4,866 crore), Visa Steel (Rs 3,394 crore), Wind World India Ltd (Rs 3,161 crore), Lavasa Corporation (Rs 1,424 crore), Consolidated Construction Consortium Ltd (Rs 1,353 crore), among others.

Several assets such as Videocon have seen realisable value close to liquidation value in NCLT proceedings. Many big-ticket resolutions at IBC have seen haircuts over 90%. With most of the NPAs proposed to be transferred to the bad bank being old legacy NPAs, there has been an erosion in value, making them more likely to head to liquidation.

The bad bank

Finance Minister Nirmala Sitharaman in Budget 2021-22 announced the setting up of a bad bank as part of the resolution of bad loans worth about Rs 2 lakh crore.

The bad bank or NARCL will pay up to 15 per cent of the agreed value for the loans in cash and the remaining 85 per cent would be government-guaranteed security receipts (SRs). The government guarantee would be invoked if there is a loss against the threshold value.

This sovereign guarantee would be for a period of five years and NARCL would have to pay a fee for this.

“The SRs are getting the backstop through government funding only in as much as to pay the gap between the realised value (resolution/liquidation) and the face value of SRs and this will hold good for five years,” Sitharaman had said.

The fee for the guarantee would be initially 0.25 per cent, which would progressively increase to 0.5 per cent in case of delay in resolution of bad loans.