Lenders are looking to restructure ₹2,000 crore loans owed by embattled billionaire B.R. Shetty’s Abu Dhabi-based Neopharma Llc., including conversion of some of its debt into equity, a person aware of the matter said.
According to Bloomberg, lenders to Neopharma comprise Abu Dhabi Commercial Bank PJSC, Abu Dhabi Islamic Bank PJSC, Dubai Islamic Bank PJSC, Emirates Islamic Bank PJSC, Bahrain’s First Energy Bank BSC and Mumbai-based Bank of Baroda (BoB).
Charges against Shetty, who founded healthcare provider NMC Health in the United Arab Emirates (UAE) include under-reporting of debt and not using loans for the purpose they were raised. Shetty denied these charges in a statement released in April.
According to the person cited above, who spoke on condition of anonymity, lenders have held a meeting on the debt recast plan but are yet to finalise the contours of the deal. A proposal could include both longer debt repayment period and conversion of some of the company’s loans into equity, this person added.
“Some preliminary discussions have happened and it is still a long way before the plan is finalized. Moreover, lenders have to agree to the plan after it has been formulated,” the person said.
Founded in 2003, Neopharma has subsidiaries in six countries including the US, UK and Russia. It also has joint ventures in Japan, Egypt and India, according to its website.
“Members of the lenders’ consortium are planning to appoint a consultancy to look at the viability of the business and assist them with the restructuring plan,” the person said.
Emails sent to Neopharma, BoB and to Shetty’s office remained unanswered till the time of going to press.
Debt recast was quite a popular tool in India till April 2015 when regulatory forbearance in the form of lower provisions were withdrawn. Since then, banks have to set aside at least 15% in provisions on all restructured loans, same as that of bad loans. Faced with the COVID-19 pandemic and expectations of a surge in bad loans, lenders are hoping for some relief on provisioning by the Reserve Bank of India (RBI).
State-run BoB has already approached the Karnataka high court to restrain Shetty from selling his assets—even those that are not pledged with the bank. As Shetty gave a personal guarantee on these loans, BoB believes all his assets should be part of the injunction. The court is yet to pass its ruling on the case.
The bank had earlier sought a similar injunction from a sessions court in Bengaluru. The court offered partial relief and barred Shetty and his wife from selling or transferring only the 16 properties used as collateral for securing loans of ₹1,912 crore from BoB. This is the bank’s exposure to the Shetty group of companies. One of his companies Unimoni Financial Services Ltd (erstwhile UAE Exchange) has credit lines sanctioned from Indian banks like Dhanlaxmi Bank, BoB, CSB Bank, Indian Overseas Bank and South Indian Bank, as per a list of registered charges available on the registrar of companies’ website.
Meanwhile, a Bloomberg report on 3 March said Shetty is planning to sell Neopharma and has been approached by interested parties, including regional investors and family offices. The deal could value the pharma company at between $700 million and $1 billion, the report said.
