Edelweiss, Kotak may buy Avantha’s Rs4,300 crore debt
Axis Bank-led consortium is yet to take final call with both firms seeking a 50% haircut
Mumbai: Edelweiss Asset Reconstruction Co. and Kotak group company Phoenix ARC Pvt. Ltd are the top contenders to buy Rs4,300 crore of debt of Jhabua Power Ltd (JPL)—a unit of Avantha Power & Infrastructure Ltd—from a group of lenders led by Axis Bank, two people aware of the development said.
According to the people cited above, the lenders are yet to decide as both ARCs are seeking up to 50% haircut on the transaction. A third strategic suitor is also in the fray but has not made a formal offer, the people said.
The development comes following reports that Avantha group, led by industrialist Gautam Thapar, is in talks to sell the unit.
Business Standard reported in July last year that Avantha group was in talks with Resurgent Power, a joint venture between Tata Power Ltd and ICICI Ventures, the private equity arm of ICICI Bank. In June 2017, Economic Times reported that the group was in talks with Adani Power to sell the unit.
“None of the previous discussions to sell the asset were fruitful, following which the banks have decided to sell the loans,” said one of the two people. “The urgency to do so is more now because of RBI’s 12 February circular, under which the lenders have to find a solution or refer the case to bankruptcy court,” the person added.
The Reserve Bank of India’s (RBI) revised framework for resolution of stressed assets aim at quick reporting of defaults, coming out with resolution plans for defaulting companies, and time-bound referrals of defaulting firms to the National Company Law Tribunal (NCLT).
Responding to a query from Mint, an Axis Bank spokesperson said, “As a matter of company policy, we do not comment on client-specific matters.”
Emails seeking comments to Avantha group, Edelweiss and Phoenix ARC remained unanswered until press time.
JPL is based at Seoni district in Madhya Pradesh and currently has 600MW thermal capacity fully operational and another 660MW under implementation. The plant has long-term power purchase agreements (PPA) for 71% of its total generation, with Madhya Pradesh buying 35% and Kerala buying 36%. It has full fuel linkage with Coal India.
“If Edelweiss does acquire the debt, then there is a high probability that it will work with the existing promoters to turn assets around instead of taking the asset to NCLT for a change in control,” said the second person cited above.
For Edelweiss, this will be the second such transaction in Avantha group if its bid is accepted. In April last year, it acquired a large portion of the debt of BILT Graphic Paper Products Ltd. BILT Graphic is part of Ballarpur Industries Ltd, the flagship firm of the Avantha Group, and is one of India’s largest producers of writing and printing paper.
The group, burdened with debt, is looking to sell assets to raise cash. In 2014, it sold its Korba power plant to Adani Power for Rs4,200 crore. Another group company, Crompton Greaves Consumer Electricals Ltd, sold a large stake in its consumer electrical business to private equity funds Advent International Corp. and Temasek Holdings for Rs2,000 crore.
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