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The government-owned bad debt aggregator NARCL (National Asset Reconstruction Company Ltd) has emerged as a successful bidder for Dharani Sugars & Chemicals Ltd, indicating the prospects of revival for the Chennai-headquartered company.
With no bid from ARCs (asset reconstruction companies) or eligible private lenders as of September 18, NARCL, which offered ₹222.5 crore as the anchor bid for the purchase and acquisition of financial assets of Dharani Sugars, has become a successful bidder, according to industry sources.
A consortium of banks led by Indian Bank (which accounts for 35 per cent of the debt) had placed a ₹619 crore (NCLT-admitted claim) loan for sale at an offer price of ₹222.5 crore and decided to run the Swiss Challenge auction process on the offer received from NARCL on September 18. The financial institutions excluded from the Swiss Challenge process were the Sugar Development Fund, the Indian Renewable Energy Development Agency (IREDA), and the ECB portion of ICICI Bank.
All ARCs/NBFCs/FIs/Banks are allowed to participate in the process and shall be duly registered under the applicable laws and mandated by RBI, SEBI, and other Regulatory Authority and eligible for purchase of identified stressed asset/ Non-performing Assets (NPAs) of Dharani Sugars. In the case of NBFCs, they should be eligible for the assignment of debt with a valid RBI licence.
Swiss Challenge
Under the Swiss Challenge system, lenders publicly call for counter bids to match the initial offers made by NARCL. If there are no better offers, NARCL wins the bid. But if counter offers exceed the NARCL bid, the bad loan bank can match the increased offer.
Thus, with no counter bids in response to the Swiss Challenge, NARCL emerged successful bidder for a base price of ₹222.5 crore.
A significant drop in capacity utilisation of Dharani Sugars on account of the continuous drought in Tamil Nadu between 2016 and 2018 led to huge losses and a liquidity crunch. The company could not service the loans and the loans slipped into NPA. Subsequently, the loans became NPA in the books of the lenders and the company was not providing interest in the books of the company. It was discussing with the lenders for a one-time settlement of the principal outstanding as of the NPA date.
With NARCL winning the bid, there is an opportunity for reviving the business of the company in partnership with the promoters or other investors.
NARCL has been set up by banks to aggregate and consolidate stressed assets for their subsequent resolution. It seeks to resolve stressed loan assets above ₹500 crore.
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