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Edelweiss ARC is under pressure to recover ₹1,996 crore in unpaid dues from Karaikal port

P Manoj Mumbai | Updated on July 27, 2021

Edelweiss ARC acquired 96 per cent of the debt of Karaikal Port from nine bank

The eight-year timeline to restructure the loan ends in 2023; Potential deal with Adani gains momentum

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Edelweiss Asset Reconstruction Co Ltd (EARC) is weighing the next course of action to recover unpaid dues from Karaikal Port Pvt Ltd after the Madras High Court dismissed a writ petition brought by the port’s promoter Marg Ltd seeking to quash a letter written by EARC asking Marg to pay the entire outstanding of ₹1,995.95 crore.

The April 30 letter written by EARC said it will be forced to revoke the master restructuring agreement of July 26, 2018, if the entire debt of ₹1,995.95 crore was not paid in seven days.

The EARC letter was a fall out of a default by Marg towards repayment of the debts assigned to EARC by nine state-run banks under various agreements between July 2015 and September 2016.

The Madras High Court dismissed the petition on July 2 stating that the writ petition is “not maintainable”, citing various reasons.

The development will set the stage for Adani Ports and Special Economic Zone Ltd (APSEZ) to fast track its move to buy Karaikal Port Pvt Ltd, the entity that runs the private port in Puducherry.

Karaikal Port Pvt Ltd runs the all-weather port developed on Build, Operate and Transfer (BOT) format under Public Private Partnership (PPP) on a 30-year concession awarded by the Puducherry government. The port started operations in June 2009.

Edelweiss ARC has come under pressure “to do something” as the restructuring of the debt assigned by the original lenders to the ARC has to be completed within 8 years which ends in July 2023.

‘Will take action’

With the deadline for completing the restructuring exercise and close the loan account just two years away, a senior official at Edelweiss ARC said it “may take whatever action is required” to recover the unpaid dues. The company is yet to respond to a query sent by BusinessLine

“As the loan was assigned to EARC by the banks, EARC will have to go through a transparent process to recover the money,” a banker briefed on the matter said.

Karaikal Port Pvt Ltd had availed loans from a clutch of state-run lenders including Indian Bank, Oriental Bank of Commerce, Allahabad Bank, Indian Overseas Bank, Central Bank of India, Punjab National Bank, United Bank of India, Indian Bank, India Infrastructure Finance Company Limited, Syndicate Bank, Corporation Bank and State Bank of Hyderabad.

In the wake of the economic slowdown and the consequent under-utilisation of Karaikal Port's capacity, the port operator faced financial stress and defaulted on debt repayments.

The debt was restructured in 2012-13 and subsequently, out of the initial lenders, nine lenders assigned their debt to EARC.

Marg Ltd, the promoter of the port, holds 45 per cent stake in Karaikal Port Pvt Ltd.

Four private equity funds - Ascent Capital Advisors India Pvt Ltd, Jacob Ballas Capital India Pvt Ltd, Affirma Capital India and GIP India - together hold 44 per cent stake in the Karaikal Port and the balance 11 per cent equity is held by EARC.

Published on July 26, 2021

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