Debt Recast: GMR’s Power Plant Sale Proposal Stuck In Limbo

One of India's first strategic debt restructuring accounts is stuck in limbo as lenders are yet to make up their mind on a buyout offer before them.

An 11-bank consortium led by IDBI Bank Ltd. is still contemplating on accepting a bid made by Kolkata-based Srei Group for GMR Rajahmundry Energy Ltd., which went under Strategic Debt Restructuring (SDR) in 2015, three people in the know told BloombergQuint.

The lenders are not comfortable with the terms laid out by Srei, including a clause which wants them to take a haircut of more than 50 percent on the outstanding loan amount of around Rs 2,300 crore, said one of the persons quoted above on condition of anonymity as the details are confidential.

Lenders are mandated to find a new buyer for the property within 18 months of taking over management control at a company after invoking SDR, which allows them to convert debt into equity. In this case, the time period ends in mid-June, which means that the lenders may be forced to seek an extension from the banking regulator, said one of the persons quoted above.

The GMR Rajahmundry Energy had set up a gas-based power plant in Andhra Pradesh in 2015, but is yet to commission the project as gas is in short supply, making it unviable to operate the plant. Bengaluru-based GMR Group has another power plant in Chhattisgarh which has also gone under SDR. The group, which developed and operates the Delhi and Hyderabad airports, had a debt of nearly Rs 19,000 crore on its books as of March.

Sunil Kanoria, vice chairman at Srei Infrastructure Ltd., declined to comment on the story, while Hemant Kanoria, chairman and managing director of the company, denied any information about such a bid. GMR too declined to comment. In an emailed reply to BloombergQuint, IDBI said it “may not comment” on “client-specific information”.

Also Read: GMR Infrastructure Turnaround: No Green Light From Auditor Yet

GMR's Debt Trouble

The lenders and GMR Group want the deal to be completed as soon as possible, as the outstanding loan amount will turn into a non-performing asset if a new buyer is not found before the SDR timeline ends.

The lenders, however, don't want to take any hasty decisions as increased scrutiny by investigative agencies has made them more cautious about taking a haircut on the debt of stressed companies. The Indian banking industry is sitting on stressed loans worth over Rs 10 lakh crore and are currently looking at the government and the Reserve Bank of India (RBI) to come up with a resolution plan which protects them from undue scrutiny in case of genuine business decisions.