Aditya Birla group's ARC set to make a formal bid for RattanIndia Power

Seeks to partner Goldman Sachs, former promoter of the stressed firm, to bid

The Aditya Birla group’s asset reconstruction company (ARC) is set to make a formal bid for RattanIndia Power, which has defaulted loans worth Rs 8,200 crore.

Aditya Birla ARC, which has a tie up with US-based Verde Partners Inc, is also looking at the option to partner Goldman Sachs and Rajiv Rattan, promoter of the stressed company, to make the bid, a source from a leading bank said. If successful, this would be the first transaction by the ARC, set up in August last year.

Lenders are expecting an offer from the ARC by January 21. They are expected to take a decision by February 1. The banks are likely to take a hit of 50 per cent on its exposure to the Maharashtra, Amravati-based project that generates 1,350 Mw of electricity.

RattanIndia is among the seven power projects that have been identified by lenders to sell after restructuring of the debt. However, the Reserve Bank of India banned any debt restructuring in a circular issued on February 12 last year, lenders are expecting a decision by the Supreme Court on the issue. The suit filed by the power producers’ association is pending with the Supreme Court, which has transferred all the cases pending in various cases to it.

RattanIndia was to build coal-fired power plants to generate 5,600 Mw in Nashik and Amravati. The company was earlier known as Indiabulls Power but after the promoters of Indiabulls parted ways, the company’s name was changed.

Lenders are saddled with Rs 2.2 trillion of exposure to the Indian power sector and trying to sell the projects to investors who have financial muscle to repay debt in future. The Adani group is closing in on two big power projects, Coastal Energen and GMR Chhattisgarh, after lenders offered their stake for sale.

Resurgent Power Ventures, a joint venture between Tata Power and ICICI Ventures, acquired 75 per cent stake in Prayagraj Power from the Jaypee group after the latter failed to repay its debt. Prayagraj operates a 1,980-Mw plant in Uttar Pradesh.

The banking sector is already plagued with bad loans worth $210 billion. Of this, 90 per cent are held by state-owned lenders. Last year, the RBI came out with two lists of 30 companies, which were sent to the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016, for debt resolution. But barring few, most of the cases are mired in litigation.

According to the World Bank, Indian lenders recover only 26.4 per cent of loans after an average 4.3 years compared to the US, where banks recover 82.1 per cent of their loan within a year. 

A committee set up by the power ministry had listed 34 coal-fired power plants as stressed assets with a combined capacity of 40,130 Mw. Total commissioned capacity is 24,405 Mw with the rest 15,725 Mw under construction.

Of the 34 power projects, only 17 have been completed. The remaining are either partially complete or under execution. Ten of these are located in Chhattisgarh, followed by six in Odisha, five in Maharashtra and four in Madhya Pradesh. Uttar Pradesh and Andhra Pradesh have two such projects each. Bihar, Jharkhand, West Bengal, Tamil Nadu and West Bengal have one each.

The power sector faced head winds due to lack of gas earlier promised by the government, even as the power plants based on imported coal were unable to produce electricity at viable rates as landed price of imported coal has touched a new high. At the same time, the cost of wind and solar infrastructure in India is falling consistently.