Suraksha Asset Reconstruction Co and government owned
India had submitted a revised resolution plan on the direction of the Supreme Court (SC) after the previous highest bid by NBCC did not pass muster with the apex court because NBCC had considered Rs 750 crore deposited by Jaypee promoter Jaiprakash Associates with the court as part of the plan.
“Now with the SC disallowing the use of this money by NBCC, it remains to be seen how the company arranges the money. Both the bids opened today have no cash component. NBCC is offering lenders land and some equity in the Yamuna Expressway project while Suraksha is offering us only land. But what will banks do by taking this land? We are not a land bank. We need cash,” said a person familiar with the plan.
Both the bidders have offered the 2000 acres of land the company possess around Noida where the project is situated. However, lenders say they cannot take possession of such a huge quantity of land as liquidating it will be a task. Moreover, RBI norms do not allow banks to hold such a large track of land for more than seven years.
Jaypee Infratech owes lenders led by IDBI Bank and also including ICICI Bank, IFCI and SBI close to Rs 10,000 crore. This case has been pending resolution for close to four years after being admitted in 2017.
Lenders together own 43% of the debt. But the key to the resolution plan is the home buyers who have been given the designation of financial creditors in the project. These 20,000 home buyers together hold 55% of the debt and are keen to see their completed flats.
“Home buyers are more comfortable with NBCC because it is a government owned company and is a construction firm which can deliver them the flats. They have burnt their fingers once as NBCC has not been able to deliver despite being voted as the winner in 2019. However, they feel safe with a government owned company rather than a private one, said a second person aware of the negotiations.
NBCC has sought time to get various government approvals to complete the plan. Lenders are also wary on whether both companies can execute and arrange funding to complete the construction of the pending flats some of which had to be delivered a decade ago.
“It looks like lenders will themselves have to give loans to NBCC to complete these projects because the government owned company is preferred by the majority creditors which are home buyers but does not have the money to execute the project. Lenders are caught between the devil and the deep sea,” said the second person cited above.
For lenders the cumulative Rs 10,000 crore owed by the company is a small amount compared to the lakhs of crore of bad loan recovery in the works currently. Lenders say that a quick resolution of this process will be appreciated.
“Lenders have asked certain clarifications based on the presentations done today. Those will be answered later this week. The CoC will meet again at the end of the meet to take stock and decide the future course of action,” said the first person cited above.
Consultancy firm RBSA is doing the technical while Cyril Amarchand Mangaldas is doing the legal evaluation for lenders.
