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Union Bank of India has evolved a model for resolution of stressed assets in the infrastructure space by seeking to bundle the parent company and the SPVs it has floated for each project into a single entity to pursue a holistic resolution.
The bank is testing this model in the case of Era Infra Engineering for which it is the lead bank. About 34 banks reportedly have a collective exposure of more than ₹10,000 crore to this company.
Union Bank of India MD and CEO Rajkiran Rai G observed that an EPC (engineering, procurement and construction) company, which is usually a holding company, generally doesn’t have any assets. It is the special purpose vehicles in which the assets (in the case of Era Infra, it is the road assets) are housed. “Actually, we have requested all the banks to come together and make it one entity (all SPVs and the parent company are merged). So, we have a better way of settlement. They have a claim on NHAI to the extent of ₹20,000 crore,” said Rai.
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