Dharani Sugars bid puts ARCs on par with NARCL
Mumbai: For the first time, private asset reconstruction companies (ARCs) are on equal footing with the government-owned bad bank NARCL.
In the Dharani Sugars case, private ARCs sought a clarification on the method to compute the net present value (NPV) based on the initial bid of ₹235.9 crore.
Banks responded by saying that regardless of whether it's a 100% upfront cash offer or based on a combination of cash and security receipts (SRs), the comparison value remains ₹235.9 crore, which allows private ARCs to value their bid at ₹235.9 crore on an all-cash basis or ₹331 crore using the cash to security receipt structure.
A consortium of 10 banks led by Indian Bank, holding 34% of the debt, has placed a ₹619 crore loan for sale at an offer price of ₹222.5 crore and will hold Swiss Challenge on September 18. NARCL offered ₹222.5 crore as the anchor bid, with a minimum mark-up requirement of ₹13.4 crore for other challengers.
Some financial institutions like the Sugar Development Fund, the Indian Renewable Energy Development Agency (IREDA), and ICICI Bank, which holds a portion of ECBs, have excluded their debt from the sale.
The sale represents 75% of the company's total debt.
«Private ARCs now have a fair chance to bid on distressed assets, comparing cash bids and assessing the credit value represented by the difference between cash and SR prices,» said an ARC executive. «Initially, we were unsure about calculating the NPV based on our bid of ₹235.9 crore, which exceeded the Swiss challenge.
We asked the lead bank if we could offer an all-cash amount of ₹167.4 crore based on the NPV. The bank clarified that we can either make an all-cash offer of ₹235.9 crore or propose a bid of ₹331 crore using the cash and security
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