BackJSPL to allow lenders to convert debt into equity in case of Jindal Power default
Jindal Steel and Power said its board has approved a decision to allow Jindal Power's lenders the right to invoke a Strategic Debt Restructuring Scheme in the event of a default
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Mumbai: Jindal Steel and Power Ltd (JSPL) has agreed to allow lenders to its subsidiary Jindal Power Ltd to convert debt into equity in the event of a default, the company said in a statement on Monday.
JSPL’s board has approved a decision to allow Jindal Power’s lenders the right to invoke a strategic debt restructuring (SDR) scheme in the event of a default. The debt is related to Jindal Power’s 1200 megawatt (MW) power plant project at Tamnar, Chhattisgarh. The company did not disclose the quantum of debt outstanding for its Chhattisgarh project.
In September, JSPL’s total consolidated debt was at ₹ 42,534.04 crore. According to Capitaline data, Jindal Power’s stand-alone debt was at ₹ 3,319.10 crore in 20-2014.
Rating agency Icra Ltd has a rating of A+ on Jindal Power. “The rating continues to be on watch with developing implications as the long-term fuel sourcing arrangement for majority of Jindal Power’s capacity is still not certain," Icra said in its 8 December statement. “The rating could be constrained by deterioration in the credit profile of its parent company—JSPL and strong linkages between the two companies. The rating is also constrained by moderation in Jindal Power’s financial performance with decline in its operating profitability and the challenges in the short to medium term till the coal availability, and power evacuation issues are resolved and the company is able to enter into Power Purchase Agreements," the report said.
Under the SDR norms introduced by the Reserve Bank of India in June, banks are allowed to acquire a 51% stake or more in companies where debt restructuring fails to revive them. The banks then have to sell the stake to a new promoter within 18 months.
So far lenders have invoked SDR in the cases of Ankit Metal and Power Ltd, Rohit Ferro-Tech Ltd, IVRCL Ltd, Gammon India Ltd, Monnet Ispat and Energy Ltd, Electrosteel Steels Ltd, VISA Steel Ltd, Lanco Teesta Hydro Power Pvt. Ltd and Jyoti Structures Ltd, according to stock exchange notifications by these companies. On 22 December, Mint reported banks have started pitching assets which are under SDR to private equity firms.
On Monday, shares of JSPL fell 1.89% to ₹ 90.60 apiece on BSE while the Sensex rose 0.76% to 26,034.13 points.
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