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Jaiprakash Associates Limited (JAL), the infrastructure arm of the Jaypee Group, might finally be nearing a solution for its debt burden of INR 17,700 crore (as of March 2023). The National Asset Reconstruction Company of India (NARCL), a government-backed company established specifically to tackle bad loans, has proposed to acquire a significant portion of JAL's debt from banks. This offer, reportedly the largest by NARCL since its inception two years ago, has given hope for a swift resolution to JAL's financial debt.
According to industry sources, NARCL has proposed to buy INR 10,000 crore worth of debt from JAL's lenders. This acquisition, if successful, would mark a milestone for NARCL and potentially lead to a takeover of JAL's core businesses in cement (a major revenue driver), hospitality, real estate, and construction. Notably, the offer excludes debt already acquired by another asset reconstruction company, Ares SSG Capital-backed Asset Care & Reconstruction Enterprises (ACRE), which purchased INR 650 crore from Yes Bank and Karnataka Bank.
Jaiprakash Associates has a total outstanding debt of INR 17,700 crore. State Bank of India (SBI) is the largest lender, holding a significant portion (26%) of the debt, followed by ICICI Bank (19%) and IDBI Bank (11%). The remaining debt is distributed amongst other financial institutions.
The Jaypee Group was one of the 12 large borrowers identified by the Reserve Bank of India (RBI) for fast-track resolution under the Insolvency and Bankruptcy Code (IBC) in 2017. While banks-initiated insolvency proceedings against JAL, the matter remains pending before the National Company Law Tribunal (NCLT). This extended legal process can be time-consuming and complex. Additionally, the Jaypee Group has reportedly been exploring the possibility of out-of-court settlements with lenders in parallel, seeking an alternative path to resolve the debt issue.
For the NARCL offer to succeed, a majority of lenders need to agree to sell their debt to the government-backed agency. This could potentially pave the way for a more streamlined resolution process compared to the complexities of the ongoing NCLT case. However, reaching an agreement with the Jaypee Group might still be a hurdle. The group's willingness to cooperate with the debt resolution process, along with the final decision of lenders, will be crucial factors in determining the future course of action.
A successful resolution of JAL's debt problem could have a positive impact. It could restore JAL's operations, perhaps resulting in project completion, increased financial health, and job security for staff. Furthermore, a successful debt resolution for JAL will set an example for how NARCL handles other significant problematic loans in India's banking sector, perhaps speeding up the whole cleanup process.
The NARCL offer presents a promising path forward for resolving Jaiprakash Associates' debt crisis. However, several important steps remain, including securing lender approval (a majority vote) and reaching an agreement with the Jaypee Group. Only time will tell if this latest development will finally usher in a new era of stability for JAL.
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