Reliance Power has made a one-time settlement (OTS) proposal worth Rs 1,200 crore to the lenders of its subsidiary, Vidarbha Industries Power Ltd (VIPL), to settle its debt. According to the sources aware of the matter, the company aims to pay the lenders, including prominent institutions such as Axis Bank, SBI, Bank of Baroda, PNB, Canara Bank, and Bank of Maharashtra, approximately Rs 1,200 crore in upfront cash as part of the settlement.
Reliance Power's proposal comes at a time when VIPL carries an outstanding loan amounting to around Rs 2,200 crore as of March 31, 2022.
The OTS offer put forth by Reliance Power has garnered support from Varde Partners of Singapore, an existing investor in another group entity, Reliance Infrastructure Ltd. This backing from Varde Partners lends credibility to Reliance Power's commitment to resolving VIPL's debt issue.
VIPL operates a coal-based project with a substantial capacity of 600 MW (2×300 MW) situated in the Butibori Industrial Area of Nagpur, Maharashtra. The project plays a crucial role in meeting the energy requirements of the region, and its successful operation is of strategic importance.
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Reliance Power's OTS offer surpasses previous offers from CFM Asset Reconstruction Pvt Ltd and National Asset Reconstruction Company Limited (NARCL).
CFM Asset Reconstruction Pvt Ltd, based in Ahmedabad, had offered an all-cash settlement of Rs 1,120 crore to VIPL's lenders. However, CFM ARC is now under the scrutiny of the Reserve Bank of India (RBI) and the Income Tax Department due to alleged malpractices and business misconduct. This development has raised concerns about the company's ability to conclude a substantial transaction of over Rs 1,000 crore on an all-cash basis.
Additionally, National Asset Reconstruction Company Limited (NARCL) also submitted an offer of Rs 1,150 crore to VIPL's lenders subsequent to CFM ARC's proposal. However, only 15 percent of NARCL's offer is payable in upfront cash, while the remaining amount will be paid in interest-free installments over the next five years.
The net present value of NARCL's offer stands at Rs 850 crore, which is significantly lower compared to the all-cash offer of Rs 1,200 crore presented by Reliance Power.
Compared to this, the Rs 1,200 crore all-cash offer by Reliance Power is significantly higher and attractive for the lenders of VIPL.
The higher upfront cash payment provides immediate relief to the lenders, enabling them to address their financial obligations more effectively. Given the favorable terms of the proposal and the company's financial stability, Reliance Power's offer has garnered significant attention and support.
Sources close to the matter have revealed that VIPL's lenders are likely to convene a meeting soon to carefully evaluate the settlement proposal put forth by Reliance Power. The lenders' decision will have far-reaching implications for both Reliance Power and VIPL, shaping the future course of action for the resolution of VIPL's debt.
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