Aditya Birla ARC leads race to buy Anil Ambani firm Vidarbha's debt

Firm is a Reliance Power subsidiary that owes Rs 2,569 cr as principal amount to banks

Aditya Birla Asset Reconstruction Company (ARC), a subsidiary of Aditya Birla Capital, is leading the race for the acquisition of debt of Vidarbha Industries Power (VIPL), a bankrupt company, owned by Anil Ambani’s Reliance Power.

 Apart from Aditya Birla ARC, Rare ARC, Reliance ARC, and Asset Reconstruction Company India (Arcil) have submitted their expressions of interest (EoIs) and bids to the lenders under the Swiss Challenge formula. In the earlier round, CFM ARC had made an offer of Rs 1,220 crore to the lenders, while Reliance Power and Varde made a joint offer of Rs 1,260 crore.

 The offers made by the ARCs under the Swiss Challenge, which ended on Monday, could not be verified but a source said the offers could touch around Rs 2,000 crore and AB Birla ARC has made the best offer. The Hinduja group has emerged as the winner of Reliance Capital, which owns Reliance ARC.

 An e-mail sent to Aditya Birla ARC did not elicit any response. Aditya Birla ARC is a joint venture between ABCL and Varde Partners of the US.

 VIPL had defaulted on loans to a consortium of lenders, including Axis Bank, State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, and Bank of Maharashtra. The principal outstanding debt of the company held by the lenders amounts to Rs 2,569 crore and with interest, its outstanding has gone up to Rs 3,600 crore.

 The company operates a 600 Mw coal-based power plant in Nagpur. One of the lenders of VIPL filed an application under the provisions of the Insolvency & Bankruptcy Code (IBC), 2016, in January 2020, seeking debt resolution of VIPL. The matter is still pending for consideration by the National Company Law Tribunal (NCLT). VIPL was pursuing debt resolution with its lenders outside the corporate insolvency resolution process but talks could not come to a conclusion.

 But the bankruptcy proceedings impacted the company’s operations as the entire capacity of the Butibori power plant (600 Mw) remained non-operational since January 2019 due to protracted delays in issuing regulatory orders and a lack of fuel supply for one of the units. Subsequently, there has not been any income from the sale of power, which has impacted the company’s accruals and has resulted in continuing delays in its debt-servicing obligations.

 The company’s electricity off-taker, Adani Electricity, issued a termination letter for the power purchase agreement (PPA) to VIPL in April 2019, citing below-threshold availability in certain years. The company challenged the validity and legality of the termination letter, but received unfavourable rulings from the MERC and APTEL, and currently, the matter is pending at the Supreme Court.

 Meanwhile, after the PPA termination notice by the procurer, lenders have exercised their right to substitute VIPL with another entity for operating the thermal station for recovery of their dues, according to the provisions of the PPA, a statement by rating firm, ICRA said in February this year.

In-debted VIPL

 *The Anil Ambani company owes Rs 2,569 cr as principal amount to banks. With interest, its outstanding is       Rs 3,600 crore

* Lenders are in the process to sell company's debt to ARCs

* VIPL operates 600-Mw coal-based power plant in Nagpur

*  Electricity generation unit non-operational since January 2019 due to lack of coal