Banks are continuing with their standard practice of placing up massive stressed assets for sale to asset reconstruction providers (ARCs) and other investors even as the procedure for setting up the National Asset Reconstruction Company (NARCL) has been set in motion. The possibility of faster and much better-yielding resolutions in some assets is the cause behind this, according to bankers and other sector executives.
“We are exploring our options in cases where we think there is a possibility of achieving quicker resolution outside the NARCL. Also, many of the assets which are being canvassed separately for sale to ARCs are not part of the list of assets identified for transfer to the NARCL,” a senior executive with a mid-sized private bank mentioned.
The procedure of setting up the terrible bank, securing a assure from the government and lastly finding the institution off the ground could take some time, bankers anticipate. In the meantime, they are attempting to maximise recoveries in as a lot of circumstances as attainable.
KSK Mahanadi Power, Sathavahana Ispat, Srinagar Banihal Expressway, MSP Metallics, Sew Infrastructure and Coastal Energen are amongst the assets for which lenders are operating the resolution procedure. There are also situations of one-time settlement offers as in the case of Jindal India Thermal Power.
Nirmal Gangwal, managing companion, Brescon & Allied Partners, mentioned sales to ARCs and strategic investors are parallel processes and the NARCL procedure will be an extra one which will also come in handy. “The setting up of NARCL is an ongoing process. In the meantime, if the outlook for some sector suddenly turns positive or there is interest for an asset from an ARC or a strategic investor, bankers would like to explore whatever is good for them,” he mentioned.
Pricing could be a further cause why banks are picking the auction route for resolution. An sector executive who spoke on situation of anonymity mentioned that the pricing in case of transfers to NARCL will be fairly low. “Banks may be getting 40-50% recovery in some of these sales, whereas in NARCL they just get 10 cents to a dollar and that too not in a full-cash deal,” the executive mentioned.
Most offers involving banks and ARCs these days are all-money offers exactly where the whole quantity goes straight into the bank’s profit. “So, the NARCL is actually meant for cases where lenders are unable to find a resolution or where they feel there is a need for warehousing for some time,” the executive mentioned.
Some circumstances understood to be below consideration for transfer to the NARCL list are currently undergoing insolvency proceedings such as Amtek Auto, Castex Technologies, JP Infra, Videocon Oil Ventures and Lavasa Corporation.
NARCL has not too long ago applied for a licence to the Reserve Bank of India (RBI) immediately after raising Rs 149 crore as paid-up capital from its constituent banks. Lenders have identified 22 stressed accounts, worth about Rs 89,000 crore, to be transferred to NARCL in the initial phase.