The government-owned National Asset Reconstruction Company (NARCL) is set to acquire the debt of Dharani Sugars and Chemicals before the end of this financial year, two people aware of the development said.
NARCL’s ₹222.5 crore binding offer had triggered a Swiss Challenge auction which was scheduled on March 17. Lenders did not receive any counter offer for the ₹619-crore creditors’ claim that was auctioned last week. The offer from NARCL equates to a 36% recovery, and lenders would receive 15% of consideration as cash and the balance would be security receipts (SR) payable on recovery of loans.
NARCL will acquire 76% of admitted debt comprising rupee loans from Indian Bank, State Bank of India, Central Bank of India, ICICI Bank, Bank of India, IDBI Bank, Union Bank of India, South Indian Bank, Indian Overseas Bank and Federal Bank.
Separately, last week IFCI backed out from a deal to sell its Rainbow Paper loans to NARCL, one of the persons cited above said. In response, NARCL revised its offer to purchase company debt from ₹110 crore to ₹87 crore. IFCI wanted the entire payment upfront as against NARCL’s offer of a 15:85 structure. Lenders have admitted claims of ₹1,136 crore for Rainbow Papers.
Dharani Sugars shot to fame after defeating the Reserve Bank of India in a landmark Supreme Court case that change the rule of the game in the country’s distressed loan market. Dharani and other petitioners from the power sector won a case against the RBI for mandating banks to admit companies to resolution under the Insolvency and Bankruptcy Code within six months of default if they fail to reach an out-of-court resolution.
In a rare order against the banking regulator, the apex court struck down the RBI’s February 12 circular as ultra vires in the Dharani Sugar vs Union of India case in 2019. Subsequently, RBI revised the guidelines asking banks to make higher provisions if they do not refer the defaulting companies for resolution under IBC.
