on Mar 25, 2021)Mumbai: Public sector banks are in for a windfall this week with set to close the Bhushan Power and Steel acquisition for Rs 19,350 crore. As the loan has already been fully provided for by lenders, the amount will add to their bottom lines for the quarter ended March 31, 2021.
Although JSW had won the bid for Bhushan Power and Steel in 2019, the transaction was pending because of litigation. The Supreme Court recently paved a way for the transaction to get through by directing lenders to return money to JSW in case the enforcement authorities attached Bhushan’s assets.
Banks had classified the loan as a fraudulent one after the Enforcement Directorate attached assets worth over Rs 4,000 crore as part of its money laundering probe against the former promoters of Bhushan.
Lenders have claims of over Rs 47,000 crore, against which they are to receive Rs 19,350 crore. The biggest gainer will be
, which is owed about Rs 9,800 crore.
Against this, around Rs 4,000 crore of recovery is expected.
will get about Rs 4,000 crore after including the claims of erstwhile Oriental Bank of Commerce and United bank of India. Other major recipients are (approximately Rs 1,600 crore) and (Rs 1,500 crore).
For public sector banks, this recovery is expected to offset any additional provisioning that could arise because of the Supreme Court order lifting the stay on classifying defaults during Covid as non-performing assets. This would also make up for any outgo that these banks might have to bear towards payment of interest on the interest that they have to compensate borrowers for the lockdown period in terms of the Supreme Court order.
JSW is expected to fund the acquisition through debt. This debt, in turn, will increase the loan book of banks and enable them to show growth in advances.
