JP Associates' Latest Asset Sales May Help Avoid Insolvency Proceedings
About 90% of the sale proceeds will help lenders bring down a part of JP Associates' Rs 27,000 crore
Asset sales initiated by Jaiprakash Associates may help the company avoid bankruptcy, according to two bankers with direct knowledge of the matter, who spoke on condition of anonymity.
On Monday, Jaiprakash Associates Ltd. said that it will be selling clinker, cement, and power plants with a total cement capacity of 9.4 million metric tonnes to Dalmia Cement (Bharat) Ltd. These assets have an enterprise value of Rs 5,666 crore and are located in Madhya Pradesh, Uttar Pradesh, and Chhattisgarh.
Separately, Jaiprakash Power Ventures Ltd will also sell its 2 metric tonnes per annum Jaypee Nigrie Cement Grinding Unit to Dalmia Cement (Bharat) for a consideration of Rs 250 crore.
Jaiprakash Associates has been under stress for many years, with banks attempting to take the company to insolvency court for years. It was part of a list of stressed accounts shortlisted by the Reserve Bank of India for insolvency proceedings in 2018.
Jaypee Group's flagship firm is currently facing proceedings under the Insolvency and Bankruptcy Code initiated by ICICI Bank Ltd. and State Bank of India at the Allahabad bench of the National Company Law Tribunal.
Lenders will likely be able to settle at least a portion of the Rs 27,000 crore worth of debt they are owed by Jaiprakash Associates through this transaction, according to the first of the two bankers quoted above.
About 90% of the sale proceeds will be used to settle debts, the first banker said. A portion of these funds will be repaid by March 2023, while the rest will be paid out a little later next year.
ICICI Bank is the lead lender to Jaiprakash Associates. Other lenders to the company include the State Bank of India, IDBI Bank, Axis Bank, Bank of India, and Canara Bank, among others.
This is part of promoter Manoj Gaur's plans to reduce the ratio of unsustainable debt on Jaiprakash Associates' balance sheet, the second banker said. After these asset sales are concluded, the promoter will also be liquidating real estate assets as part of the repayment plan, the second banker said.
Lenders and the promoter group have been working on several out-of-court resolution plans as the insolvency proceeding has not yielded the desired results so far.
In a hearing on Jan. 6 at the Allahabad National Company Law Tribunal, ICICI Bank's lawyers said that "there are no constructive proposals at hand, and we believe that some time should be given to consider the possibility of the resolution outside the IBC framework..." While the bank had sought a month's time to explore these options, a clear resolution plan had yet to be found.
State Bank of India's insolvency proceeding was heard at the NCLT last month, while admission of the case is still pending. The next hearing in this matter is set for February 2023.
Lenders may consider withdrawing insolvency proceedings in the coming few weeks if they are satisfied with the repayment plan, according to the two bankers quoted above.
Questions mailed to Manoj Gaur, ICICI Bank, and the State Bank of India on Monday evening remained unanswered.