State Bank of India (SBI) has put up assets worth over Rs 1,471 crore for sale to asset reconstruction companies (ARCs), according to a tender document on its website. The largest among the loan accounts on sale is Adhunik Power & Natural Resources Ltd, where the lender is looking to sell loans worth Rs 807 crore and equity worth nearly Rs 200 crore.
According to the details provided in the auction notice, SBI is inviting expressions of interest (EoI) from ARCs for the Adhunik Power account at a reserve price of Rs 723 crore. Of this, the debt value is Rs 699 crore and the equity value is set at Rs 24 crore.
SBI, in its notice, said that it has received approval from other lenders to Adhunik Power, including IFCI, Allahabad Bank, Oriental Bank of Commerce, Indian Overseas Bank, Dena Bank, UCO Bank, Punjab & Sindh Bank, Andhra Bank, Syndicate Bank and India Infrastructure Finance Co Ltd.
The sale of Adhunik Power’s debt would be on a cash-cum-security receipts basis, where 15 percent of the sale price would be paid upfront to the bank, while security receipts would be issued for the remaining 85 percent.
In March, CNBC-TV18 reported that the joint lender forum (JLF) to Adhunik Power had decided to sell the loans to Edelweiss ARC Ltd. However, a person close to the matter clarified that the sale eventually did not take place as banks wanted to get approval from the oversight committee (OC) set up under the aegis of the Indian Banks Association.
The other corporate accounts up for sale include Shelter Infra Projects Pvt Ltd, Shiva Texfabs Ltd, Surya World Education Research & Charitable Initiative, Rita Plastics Pvt Ltd and Teracom Ltd. Of these, Shelter Infra has been put up on auction to be sold on an all cash basis.
In all other accounts, the bank is looking at paying a 5 percent incentive amount to the ARC if the recovery is made within the first two years of buying the asset. If recovery is made in the third year, the incentive comes down to 4 percent, the notice said.
SBI has asked ARCs to submit their expression of interest by May 26 and has asked them to finish due diligence of the underlying assets by June 7. The process of e-bidding is expected to take place on June 9, according to the notice.
Indian banks are sitting on a pile of nearly Rs 10 lakh crore in stressed assets. Banks, however, have been reluctant to sell these assets to ARCs due to the haircuts they may need to take during the sale process. Bankers fear that a sharp haircut may attract the attention of investigative agencies down the road.