Lenders of Vidarbha Industries Power will hold a Swiss challenge auction on August 8 among the three shortlisted asset reconstruction companies (ARCs), said people aware of the development.
Lenders have shortlisted Aditya Birla ARC, Avenue Capital-backed Asset Reconstruction Company of India (Arcil) and Reliance ARC as eligible candidates to submit counter offers for the sale of the distressed power company, the people said.
Banks have preferred CFM Asset Reconstruction Company, an anchor bidder, to the promoter Anil Ambani group, for the proposed loan auction under a Swiss challenge mechanism, as first reported by ET. They received four expressions of interest within the stipulated deadline of July 17, as reported by ET.
CFM ARC offered ₹1,220 crore as against a higher one-time settlement offer (OTS) of ₹1,260 crore by Reliance Power, an Anil Ambani company with a controlling stake in the thermal power company. As an anchor bidder, CFM ARC will have the first right to match the highest offer that lenders receive on August 8.
Rare ARC’s expression of interest was rejected, one of the persons cited above said. While inviting bids, process advisor SBI Caps stipulated that EoI applicants should submit ₹10 lakh as a non-refundable bid process participation fee. “This is a very unusual condition aimed at discouraging potential bidders,” said a senior official from an ARC.
Lenders have stipulated that counteroffers should be 5% higher than the anchor offer of ₹1,220 crore.
The company has a principal debt of ₹2,569 crore and $26.7 million (₹220 crore) as on July 6, a document circulated by lenders inviting counteroffers stated. Axis Bank, State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank and Bank of Maharashtra are the lenders.
Vidarbha operates two coal-based units of 300 MW each at the Butibori industrial area in Nagpur. It had a power purchase agreement (PPA) with Reliance Infrastructure. In 2017, it sold the Mumbai distribution business to Adani Transmission.
Vidarbha had a coal supply pact with Western Coalfields for one 300 MW unit and it purchased coal for another unit from the market. However after Adani Electricity Mumbai terminated the PPA, WCL also cancelled its contract. The matter is pending before the Supreme Court.
The battle to acquire the power producer has stoked expectations of a quick recovery for lenders disheartened by the Supreme Court order rejecting a plea to admit it for insolvency proceedings despite a default.
Last July, the apex court dismissed Axis Bank’s petition to admit Vidarbha for insolvency, stating that the National Company Law Tribunal, which approved admitting the company, should have considered external factors that had led to the delay in payments by the borrower.
At the heart of the matter is a claim made by Vidarbha that it won an award of ₹1,730 crore from the Appellate Tribunal of Electricity. This exceeded the ₹553 crore claimed by Axis Bank. Reliance Power claimed it could not repay because the Maharashtra electricity regulator challenged the award. The case is now pending at the apex court.
