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Stressed assets: RBI panel focuses on SMEs; Orchid, GMR unit set to change hands
Photo Credit: VCCircle

For the past two years, the Reserve Bank of India has been focusing mainly on the biggest stressed assets in the banking system. This week, an RBI panel centred its attention on micro, small and medium enterprises (MSMEs).

The panel, chaired by former Securities and Exchange Board of India chairman UK Sinha, suggested setting up a Rs 5,000-crore (about $720 million) stressed asset fund for MSMEs so as to make equity investments that help recover debt or revive sick units.

Meanwhile, the RBI’s sustained pressure on commercial banks to reduce bad loans is bearing fruit. In its latest Financial Stability Report released on Thursday, the RBI said the proportion of commercial lenders’ non-performing assets (NPAs) may fall slightly to 9% by March 2020 from 9.3% in March this year.

Apart from the RBI’s reports, a few debt-laden companies remained in the spotlight this past week. Jet Airways’ bankruptcy process took initial steps, Dhanuka Laboratories Ltd received court approval to buy Orchid Pharma Ltd and Adani Power agreed to acquire GMR Chhattisgarh Energy Ltd. Here’s all the action that happened this week.

Jet Airways

Earlier this week, the resolution professional for Jet Airways, which was admitted to the National Company Law Tribunal (NCLT) a week ago for bankruptcy, invited claims from all creditors to the grounded airline by July 4.

Resolution professional Ashish Chhawchharia of Grant Thornton said in a public notice that financial creditors can submit their claims with proof by electronic means only while all other creditors can submit their claims with proof in person, by post or by electronic means.

The bankruptcy tribunal had admitted a plea filed by State Bank of India against Jet Airways on June 20.

The Mumbai-based airline owes more than Rs 8,500 crore to a consortium of 26 banks led by State Bank of India, and over Rs 15,000 crore to the tens of hundreds of vendors and around 23,000-odd employees.

Orchid Pharma

The bankruptcy court cleared a resolution plan submitted by Dhanuka Laboratories Ltd to acquire the debt-laden drugmaker.

A Chennai bench of the NCLT approved Dhanuka’s offer on Tuesday following a nod by Orchid’s lenders earlier this month.

Dhanuka Laboratories had emerged as the highest bidder for Orchid on June 11. Thereafter, just before e-voting by the committee of Orchid’s creditors was to close, Punjab National Bank (International) Ltd changed its vote and opposed the proposal. However, the NCLT ruled in favour of Dhanuka’s offer.

GMR Chhattisgarh Energy

In some positive news for the troubled power sector, an Axis Bank-led consortium of lenders to GMR Chhattisgarh Energy Ltd have approved an offer by Adani Power Ltd to acquire the debt-laden electricity generation company.

The billionaire Gautam Adani-led company said the group of lenders approved its resolution plan to acquire a controlling stake and restructure the debt of GMR Chhattisgarh.

After the transaction, Adani Power will hold a 100% stake in GMR Chhattisgarh. Of this, it will acquire a 52.38% stake from the lenders and the balance from GMR Group.

Of the 34 identified stressed power projects identified by the government, a dozen are already undergoing insolvency proceedings while almost seven projects are working out a resolution plan outside the IBC.

Amtek Auto

Almost two weeks after debt-laden Amtek Auto restarted its bankruptcy process, the National Company Law Appellate Tribunal (NCLAT) on June 26 asked the firm’s lenders to consider the resolution plans submitted by Deccan Value Investors (DVI) along with others based on the original information memorandum inviting bids.

On June 13, the resolution professional of the auto component maker had called for fresh bids after the approval from the Chandigarh bench of the NCLT in February.

In March last year, the UK-based metals group Liberty House had emerged as the highest bidder for Amtek. The US-based employee-owned hedge fund sponsor Deccan Value Investors was the No.2 bidder with an offer of Rs 3,150 crore, as per a Business Standard report.

However, Liberty House failed to honour its commitments and the resolution professional of Amtek Auto questioned its suitability to buy the troubled company.

Amtek Auto was one of 12 large corporate defaulters dragged to insolvency courts as directed by the Reserve Bank of India in June 2017.

S Kumars

The Mumbai bench of the bankruptcy court has approved a plan for liquidation of S Kumars Nationwide Ltd (SKNL) after its lenders failed to receive any viable revival plan for the textile company.

This is the second Nitin Kasliwal-promoted firm to be liquidated. In February, the Mumbai bench of the NCLT had ordered the liquidation of apparel maker Reid & Taylor India.

S Kumar Nationwide owes around Rs 7,970 crore to its financial creditors. IDBI Bank had filed an insolvency petition against the company in April last year after it defaulted on loans of Rs 1,680 crore.

The company’s committee of creditors had evaluated seven bids, including from Finquest Financial Solutions, which was one of the financial lenders to Reid & Taylor India, before agreeing on liquidation.

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