Jaypee Infratech: Suraksha ARC Bid Seen Superior To NBCC In Fourth Bidding Round
Suraksha Asset Reconstruction Co. has emerged as the leading bidder for bankrupt construction firm Jaypee Infratech Ltd. in the ongoing fourth round of bidding. In the previous round, NBCC (India) Ltd. had been declared as the winning bidder but the process was restarted following directions from the Supreme Court.
At a meeting on May 15, the resolution professional for Jaypee Infratech informed the committee of creditors that Suraksha ARC’s plan scored higher than NBCC’s on qualitative and quantitative parameters set out in the evaluation matrix, according to the minutes of the meeting. BloombergQuint has reviewed a copy of the minutes.
“... the overall score for Suraksha plan based on the scoring system in Evaluation Matrix was [53.605] out of 100 marks as compared to score for NBCC Plan a [18.977] out of 100,” the minutes said.
The score represents an initial assessment of competing bids based on preset parameters. Bidders can make changes to their plan after negotiations with the lenders. The plans will be put to vote later this month.
Business Standard newspaper first reported on Wednesday that the financial creditors to Jaypee Infratech have identified Suraksha ARC as the highest bidder.
“I have no comments to offer at this stage except that we are holding our 21st committee of creditors meeting on 20.5.2021 at 2pm. All decisions will be taken by CoC,” Jaypee Infratech’s resolution professional Anuj Jain said, responding to queries sent on Wednesday.
The Suraksha Plan
As part of its plan, Suraksha ARC plans a Rs 125 crore worth fund infusion into Jaypee Infratech to restart operations.
- The ARC will avail Rs 3,000 crore in loans to be used for completing pending housing projects.
- The ARC will also have access to Rs 300 crore which Jaiprakash Associates owes. Another Rs 750 crore is due to be received from toll road collections from the Yamuna Expressway, which Jaypee Infratech is managing.
Suraksha ARC estimates that Rs 4,300 crore in working capital will be needed to complete pending projects. The bidder aims to complete construction of the flats in 42 months, where the delivery schedule will kick in 90 days after Suraksha ARC has taken over Jaypee Infratech.
- It will set aside land parcels worth Rs 400 crore in a trust which will be used to pay any penalty due to homebuyers for delayed deliveries.
- For future delays beyond 12 months from promised date of delivery, the company has proposed a penalty rate of Rs 5 per square foot, per month.
- For homebuyers seeking a refund, Suraksha ARC has promised to pay Rs 65 crore in two installments.
- For banks and other lenders, Suraksha ARC is offering land parcels worth Rs 7,116 crore in a debt-land swap deal. The bidder will also act as an agency for monetising these land parcels for a fixed fee of Rs 25 crore.
The NBCC Plan
In comparison, NBCC has offered to infuse Rs 10 crore through equity or debt into Jaypee Infratech.
- The bidder has offered 100% shareholding in the land bank special purpose vehicle to financial creditors. It will also transfer 85% shareholding in special purpose vehicle holding the Yamuna Expressway to these creditors.
- NBCC's plan envisages raising Rs 2,000 crore through securitising the toll receipts of Yamuna Expressway.
The structure would allow infusion of Rs 2,000 crore into Jaypee Infratech, though the plan does not specify whether these funds would be used for construction of the flats, a person with direct knowledge said. The plan would score higher, if NBCC clarified that this money would be used for construction, the person added.
- For homebuyers, NBCC has promised to offer Rs 5 per square feet of delay penalty, if the delivery of flats is delayed beyond 12 months from the promised date of delivery.
- For refund seeking homebuyers, NBCC will pay Rs 62.4 crore spread over four years.
- For any refund seekers who now want delivery of homes instead, NBCC has provided a 90-day window from the date of approval of its plan.
A Long Drawn Out Process
This is the fourth round of bidding being held for Jaypee Infratech under the Insolvency & Bankruptcy Code. In the previous round, NBCC had emerged as the leading bidder. However, the Supreme Court had found that NBCC’s resolution plan and the process of finalising the bidder was not fully compliant with bankruptcy law. The court had asked that the process begin afresh and a new bidder be identified by the first week of May.
However, the bidding process has seen delays due to the second wave of the Covid-19 pandemic. The committee of creditors and the resolution professional have already approached the Supreme Court to seek an extension on the deadline, saying that a number of people involved in the process are facing health risks. A decision on the petition is still pending.
The resolution process for Jaypee Infratech under the IBC was initiated in 2017 after banks received directions from the Reserve Bank of India.