Reliance Power offers Rs 1,200 cr to settle debt of Butibori power project

Reliance Power has made a Rs 1,200 crore one-time settlement (OTS) proposal to the lenders of its subsidiary Vidarbha Industries Power Ltd (VIPL) to settle its debt, sources aware of the matter said.

As per the proposal, the company has offered to pay around Rs 1,200 crore in upfront cash to the lenders which include Axis Bank, SBI, Bank of Baroda, PNB, Canara Bank, and Bank of Maharashtra.

The outstanding loan of the company as on March 31, 2022, is around Rs 2,200 crore.

According to sources, Reliance Power's OTS offer is supported by Varde Partners of Singapore, which is already an investor in another group company, Reliance Infrastructure Ltd.

VIPL operates a coal-based project with a capacity of 600 MW (2x300 MW) at the Butibori Industrial Area in Nagpur, Maharashtra.

Prior to this, Ahmedabad-based CFM Asset Reconstruction Pvt Ltd had made an all-cash offer of Rs 1,120 crore to the lenders of VIPL.

CFM ARC is now under the scanner of RBI and the Income Tax Department for alleged malpractices and business misconduct.

The asset reconstruction company, which is a special type of financial institution that buys debtors of a bank at a mutually agreed value and attempts to recover debts or associated securities by itself, does not have the wherewithal to conclude a large transaction of over Rs 1,000 crore on all cash basis.

Post the CFM ARC offer, National Asset Reconstruction Company Limited (NARCL) had also made an offer of Rs 1,150 crore to the VIPL lenders, but out of this only 15 per cent is payable in upfront cash, while the balance will be paid in interest-free installments, over the next 5 years. The net present value of NARCL's offer is only Rs 850 crore.

Compared to this, the Rs 1,200 crore all-cash offer by Reliance Power is significantly higher and attractive for the lenders of VIPL.

Sources said the lenders of VIPL are likely to meet soon to consider the proposal.