UCO Bank, Allahabad Bank sell Jai Balaji loans to Edelweiss ARC

Debt-laden steelmaker Jai Balaji Industries is one of the 29 NPA accounts marked in RBI’s second defaulter list for bad loan resolution by 13 December. Photo: Bloomberg

State-run lenders UCO Bank and Allahabad Bank have sold their entire loan exposure to Jai Balaji Industries Ltd (JBIL) to Edelweiss Asset Reconstruction Co., ahead of a deadline to begin bankruptcy proceedings against the debt-laden steelmaker, two bankers familiar with the matter said.

Jai Balaji is one of 29 NPA accounts in the second defaulter list prepared by the Reserve Bank of India (for resolution by 13 December. If the resolution does not happen by then, lenders must initiate insolvency proceedings at the National Company Law Tribunal (NCLT). Jai Balaji has around Rs3,600 crore of debt, 40% of which is owed to these two banks.

“The lenders have sold it a discount by taking a 63% haircut. JBIL has been a non-performing asset (NPA) for nearly three years and banks have made 100% provisioning,” said one of the bankers cited above, on the condition of anonymity.

As per the terms of the loan sale, Edelweiss ARC will give 15% of the net asset value as upfront cash, and issue security receipts for the rest. The purchase of these loans will make Edelweiss ARC one of the largest creditors to the company.

State Bank of India (SBI), one of the lenders, is exploring the option of referring Jai Balaji to NCLT, said a third banker aware of the matter.

Emails sent to UCO Bank, Allahabad Bank and SBI seeking comment went unanswered.

With the deadline for a resolution plan ending on Wednesday, lenders are likely to refer most of these 29 cases to NCLT. Of them, accounts like Soma Enterprises Ltd and Jayaswal Neco Industries Ltd have already been approved for restructuring, said the third banker.

Others like Ruchi Soya, Castex Technologies, IVRCL, SEL Manufacturing, and Coastal Projects have been referred for insolvency proceedings.

In October, IFCI Ltd moved the Kolkata bench of NCLT, seeking initiation of insolvency proceedings against Jai Balaji under the Insolvency & Bankruptcy Code (IBC). The two parties, however, opted for an out-of-court settlement.

Jai Balaji had accumulated losses of Rs1,850 crore till 31 March 2017. The company had applied for restructuring of its debts under the Corporate Debt Restructuring (CDR) mechanism, which was approved in August 2012.

On Monday, shares of Jai Balaji Industries rose 4.85%, or Rs0.95, to Rs20.55 on the BSE while the benchmark Sensex gained 0.62%, or 205.49 points, to end the day at 33,455.79.