India Debt Resolution Co Ltd (IDRCL), the managing arm of the government-backed bad bank, National Asset Reconstruction Co Ltd (NARCL), has distributed about Rs 330 crore among banks after resolving two accounts in its first resolutions since the bad bank started operations in 2022.
Earlier this month, IDRCL completed the redemption of the security receipts (SRs) issued to banks after dealing with various intervention applications in the National Company Law Tribunal (NCLT)-monitored resolution of metals company Metenere Ltd through a Rs 295 crore resolution plan by Orissa Metaliks Pvt Ltd.
SRs were also redeemed in the case of bankrupt solar parts maker Helios Photo Voltaic last week, resulting in a gross recovery of Rs 92 crore after a plan by OCL Iron & Steel was approved by the NCLT.
NARCL had acquired this debt from banks under the 15:85 structure in which 15% cash was paid with the rest of the amount covered by government-backed security receipts which were to be redeemed on recovery.
“In both cases, bank SRs have been redeemed. In the Metenere case about Rs 251 crore was distributed to banks while in the case of Helios Rs 78 crore was distributed, in the first such recovery for the bad bank created for this purpose,” a person familiar with the matter said on condition of anonymity.
IDRCL did not reply to ET’s emailed queries.
To be sure, the recovery in both the cases for IDRCL was very low. The company had acquired Rs 4,879 crore of total debt in Metenere for Rs 257 crore, spelling a 95% haircut. The account was already in NCLT with a Rs 210 crore offer from Orissa Metaliks.
IDRCL acquired the company at a higher offer and ensured competing bids to Orissa Metaliks, forcing a higher final offer of Rs 295 crore. The final recovery, at 6% of the total debt, was just slightly higher given the large debt Metenere had.
“Three of the largest public sector banks will gain most from these SR redemptions. In the Metenere case, State Bank of India (38%), Bank of Baroda (16%) and Punjab National Bank (11%) will be major beneficiaries of the Rs 251 crore distribution,” said a second person.
Similarly, in the Helios case, NARCL acquired the Rs 2,058 crore debt for just Rs 62 crore, at a haircut of 97%. The final recovery of Rs 92 crore just makes it slightly better at 4.5%.
“NARCL and IDRCL were formed to deal with complex recovery cases which banks had not been able to solve. In both cases many legal knots had to be untied. In the Helios case, for example, a Supreme Court stay had to be lifted and a new insolvency process to be started while keeping costs under check. All this would not be possible without expertise,” said the second person.
In the Helios case, Punjab National Bank, with 75% of the debt, and State Bank of India (20%) will be the major beneficiaries of the recovery.
