The acquisition of Non-Performing Assets (NPA) by the National Asset Reconstruction Company of India Ltd, or NARCL, which has been popularized as Bad Bank by the Government of India (GoI), has started operating at last, with the newly established Asset Reconstruction Company (ARC) placing a bid for debts of the struggling Indore-based steel manufacturer, Mittal Corp Limited (MCL), setting a Swiss challenge method in auction into motion.
According to certain sources, the National Asset Reconstruction Company (NARCL) has made an offer of around INR 228 Crore for the debt owed by Mittal Corp Limited to Public Sector Banks, or PSBs, adding up to INR 1,414.5 Crore, which translates into a 16% recovery for the lenders.
Government-run banking institutions hold almost 89% of Mittal Corp Limited’s Outstanding Debt. The remaining 11%, or INR 173 crore, is held by Asset Care and Reconstruction Enterprise (ACRE), an Asset Reconstruction Company (ARC) supported by Ares SSG Capital Management Ltd. If NARCL’s offer considers ACRE’s claims, it will come to INR 256 Crore. Its primary proposal comprises a 15% cash payment and government-guaranteed Security Receipts (SR) for the remaining 85%.
According to the bid document released by their process consultant, PNB Investment Service Limited (PNBISL), lenders have called for expressions of interest (indication of interest) by the 6th of October, while the Swiss challenge auction has been scheduled for the 20th of October.
According to the lenders’ requirements, every counter-bid must have a margin of not less than 6% on the anchor offer or INR 242 Crore. The challenger bid may be made in cash or both Security Receipts (SR) and cash. The offered paper states that a “1st class bank” must guarantee the Security Receipts (SR); however, it doesn’t specify what a “1st class bank” is.
The total amount of the offer from NARCL, which comes to about INR 256 Crores, is substantially less than when compared with the INR 282 Crore made by Rimjhim Ispat Ltd for Mittal Corp Limited, which is at present the subject of insolvency proceedings.
After Shyam SEL and Power Limited submitted a plea, one more bidder in the competition, pledging a revamped offer, the National Company Law Tribunal (NCLT) gave a directive to lenders to halt voting on resolution ideas halfway and seek new offers. A challenge to the NCLT’s decision has been filed by Rimjhim Ispat Ltd and Jindal Stainless Limited, two additional bidders for Mittal Corp Limited, in the insolvency procedure. In the auction, Jindal Stainless Limited offered INR 251 crore, while Shyam SEL and Power Limited put forward INR 257 Crore.