The government-backed National Asset Reconstruction Company Limited (NARCL) has taken lead in taking over two stressed entities of the Srei group as it submitted the "highest net present value bid of Rs 5,555 crore" among bidders, an official said on Wednesday.
NARCL's net present value bid, submitted in the 10-hour-long "challenge mechanism" conducted by the committee of creditors (CoC) on Tuesday, constitutes Rs 3,200 crore in cash, a Rs 1000-crore jump from the previous plans offered, he said.
Although NARCL has a “clear advantage” for taking control of Srei Infrastructure Finance and Srei Equipment Finance, Authum Investment and Infrastructure, another bidder in the insolvency resolution process for the two stressed assets, “is not out of the game even though it was behind marginally in the final and fifth financial challenge bidding round due to terms and conditions and legal compliance”, the official said.
As a result of failing to raise bids above Rs 4,800 crore, a consortium of Varde Partners and Arena Investors, another bidder in the resolution process, was “out of the race during the third round”, he said.
"The challenge mechanism was successfully conducted and completed at midnight," Srei administrator Rajneesh Sharma told PTI without divulging details of the outcome of the process.
In the challenge mechanism process, two parameters - an upfront cash component and the net present value (NAV) of the committed amount under the financial proposals - are the key factors.
"There is Rs 2,200 crore in cash on Srei's balance sheet. The successful bidder has to infuse Rs 1,000 crore in cash to take over the Srei assets. Apart from cash, a short-term recovery worth Rs 3,450 crore is expected in the next 2-3 years, while optionally convertible bonds worth Rs 8,000 crore will be issued by the successful bidder for a period of up to seven years," a source aware of the development said.
The total comprehensive resolution plan will be worth Rs 13,000-14,000 crore, he said.
"In the worst case, recovery for the lenders from the Srei resolution process is expected to be Rs 9,500-10,000 crore, out of around Rs 32,000 crore exposure,” the source said.
Technical bids have already been received and after the financial bids, the two bidders--NARCL and Authum - will submit their comprehensive plans and these will be placed before CoC on January 8-9 for final voting to announce the winner.
Now, lenders will look into the final resolution plans and "conditions" therein in compliance with the Insolvency and Bankruptcy Code.
CoC will meet on January 7 to decide timelines before their planned voting on either January 8 or 9.
"The entire process may continue till January end and we expect to get an extension today from the adjudicating authority. A lot of time got wasted due to several court cases filed by an individual shareholder of Srei," the source said.
NARCL made it clear that it would not be able to offer government-backed guarantees as the asset acquisition is not on a nomination basis.
The Reserve Bank of India (RBI) superseded the boards of Srei Infrastructure Finance Ltd and Srei Equipment Finance Ltd for insolvency proceedings due to governance concerns and repayment defaults.
Insolvency proceedings against SIFL and its subsidiary SEFL commenced in October 2021 after insolvency petitions filed by the RBI were approved by the Kolkata bench of the National Company Law Tribunal (NCLT).
The total admitted claims of the financial creditors of the two NBFCs are Rs 32,750.22 crore.