NARCL's Dharani takeover hits a government bump

economictimes.indiatimes.com:

NARCL) takeover of the distressed Dharani Sugars & Chemicals account has been stalled as the government has refused to recognise the structure proposed by the bad-loan bank, three people aware of the issues said. The structure proposed by NARCL envisaged the creation of two trusts one of which is to exclusively deal with payments to State Bank of India (SBI) because the country's largest lender had exclusive security over some assets of Dharani. «SBI has some exclusive security in lieu of the loan they had given so they wanted some extra payments post recovery.

The structure proposed by NARCL had envisaged formation of two trusts to park the payment but the government has said that only one trust can be formed per account,» said a person familiar with the issues. Spokespersons for SBI and NARCL did not reply to an ET email seeking comment. Chennai-based Dharani Sugars owes lenders led by Indian Bank a total of ₹619 crore.

Other lenders to the distressed sugar maker include, SBI, Central Bank of India, ICICI Bank, Bank of India, IDBI Bank, Union Bank of India, South Indian Bank, Indian Overseas Bank and Federal Bank. NARCL had given a binding offer of ₹222.5 crore which had not received any counter offer in the Swiss challenge auction, ET had reported in March this year. The offer from NARCL equates to a 36% recovery.

NARCL offers include 15% cash, with balance being matched by security receipts (SR) which are payable on recovery of loans to specific trusts formed for different accounts. The government's refusal to agree to create flexible structures based on the covenants that banks have, highlights the challenges that NARCL faces in acquiring bad loans in what is already a delayed process. «NARCL will now have to rejig