Lenders seek EoIs for Nagarjuna bad loans from ARCs

Lenders to Nagarjuna Fertilizers and Chemicals have invited expressions of interest from asset reconstruction companies to transfer the bad loans worth ₹1,500 crore, IDBI Bank Ltd, which is part of the consortium, said.

The lenders invited expressions of interest from asset reconstruction companies and National Asset Reconstruction Company Ltd for acquiring the bad asset on an all cash basis at a reserve price of ₹810 crore. The last date for submitting EOIs is 17 November, and interested parties can conduct due diligence after that, it added.

Seven banks have an exposure to the company. IDBI will transfer ₹568 crore, State Bank of India ( ₹576.91 crore), Uco Bank ( ₹31.22 crore), Bank of India ( ₹49.98 crore), Indian Overseas Bank ( ₹103.63 crore), Punjab National Bank ( ₹55.75 crore) and ICICI Bank ₹196.70 crore. National Asset Reconstruction Co. Ltd (NARCL) can also participate, IDBI said. “The company’s promoter has been not been cooperating with banks during the insolvency proceeding and kept pursuing a stay. Banks did not receive any interest for the asset under the IBC. It is because of this that banks decided to transfer the stressed asset to ARCs as they believe they will be able to get a better recovery,” said a senior executive of a bank.

“The company even agreed to do a one-time settlement with banks in 2020, but it fell through after the enforcement directorate filed a case against the company,” he added.

The company was admitted to corporate insolvency resolution by the National Company Law Tribunal’s Hyderabad bench on 27 August 2021, after a Swiss operational creditor, Key Trade AG, filed a petition in 2019, claiming ₹17 crore plus interest. NCFL moved the appellate tribunal for the first stay against the NCLT order. Ever since the insolvency process has been in suspension. On 8 November, the Chennai bench of the NCLAT extended the stay on the insolvency proceedings further. “ We had to take a decision as we have come to dead end,” the banker added.

“IBC is the last resort for lenders as a resolution mechanism. Lenders use resolution mechanisms such as one-time settlement, sale of their stressed exposure, out of court restructuring under the June 2019 RBI circular and SARFAESI. The fastest resolution mechanisms are OTS and sale of stressed loans. We are seeing more resolution activity outside IBC as the process is taking 2-3 years,” Nikhil Shah, MD, Alvarez & Marsal, said.