NARCL to make binding offers to lenders by March 31, say bankers

National Asset Reconstruction Company — India’s bad bank — will make binding offers in 14 cases to lenders to buy out big-ticket stressed assets before the end of March. Only four/five cases may see transfer before the end of 2021-22 (FY22), said bankers.  
 

“Whether we will have eno­ugh time to push them through is something we will have to see. Lenders are trying if a few accounts can be migrated. Thi­ngs should gather pace from April onwards,” they added.
 

While the non-binding offe­rs have been given by NARCL, financial and legal due diligence are under way. After this, binding offers will be made.
 

NARCL is a public sector entity and will have to follow a competitive bidding process for these assets using the Swiss Challenge method.
 

It is a method of bidding, often used in public projects, in which an interested party initiates a proposal for a contract or bid for a project. The government then puts the details of the project out in public and invites proposals from others interested in executing it. On receipt of these bids, the original contractor gets an opportunity to match the best bid. Applied to ongoing bankruptcy cases, a Swiss Challenge may entail two rounds of bidding for a distressed company or its assets.
 

Technically, other asset reconstruction companies and market participants could make bids. They will have come up with an offer better than NARCL’s, which is giving 15 per cent cash upfront and the balance 85 per cent by issuing security receipts backed by government guarantees.
 

Senior State Bank of India (SBI) executive said banks are trying to complete the migration of four/five cases by the end of month where work is at an advanced stage, valuations done, and due diligence in place. It is a psychological milestone the lender would like to achieve.
 

“The impact it may make on the balance sheet is limited. A Rs 100-200 crore to each bank will be an upside.  The bottom line is not going to change bec­ause of this,” said a senior public sector bank (PSB) executive.
 

On January 29, SBI Chairman Dinesh Kumar Khara had said that lenders were set to transfer 15 large-ticket stressed accounts worth Rs 50,000 crore to NARCL in the first tranche by the end of the current fiscal year (FY22). The country’s largest lender is the lead bank in 12 accounts of the 15 identified cases.
 

Overall, 38 such accounts totalling Rs 83,000 crore have been identified for transfer to the bad bank.
 

While NARCL is majorly owned by PSBs, India Debt Resolution Company (IDRCL) will be majorly held by private sector banks. The broad features of the arrangement are that NARCL will acquire and aggregate the identified non-performing accounts from banks, while IDRCL, under an exclusive arrangement, will handle the debt-resolution process.