The National Asset Reconstruction Company Limited (NARCL) has received the approval of all six creditors to settle Essel Infraprojects’ Ludhiana-Talwandi Toll Road (LTTRPL) debt. The deal is valued at Rs. 270 crore, with Essel’s outstanding debt amounting to Rs. 9.88 billion. The confirmation comes after there were no competing bids received for NARCL’s offer in April. This successful acquisition is likely to be NARCL’s first for this fiscal year.
Lenders Prepare Assignment Agreement: According to sources familiar with the process, the lenders involved are currently preparing an assignment agreement to finalize the transaction. This agreement is expected to be signed within this month, after which the debt will be transferred to NARCL. It was also mentioned that this transaction adheres to NARCL’s standard structure, with 15% of the consideration in cash and the remainder in security receipts, payable upon recovery. The government guarantees the security receipts.
Milestone Achievement for NARCL: The successful settlement of Essel Infraprojects’ debt represents a significant milestone for NARCL as it marks the first concluded transaction of this fiscal year. No transactions were completed in April and May, making this acquisition even more notable. NARCL, the government-backed bad bank, has been working to address the issue of non-performing assets in the banking sector.
The Ludhiana Toll Road Project: The Ludhiana Toll Road project aimed to construct a 78-km, four-lane stretch of National Highway-95 between Ludhiana and Talwandi Bhai in Punjab by September 2014. This project operated under a concession agreement signed by the National Highways Authority of India (NHAI) in March 2012, with a validity of 29 years. Unfortunately, the project experienced significant delays, leading to it becoming a non-performing loan.
Lender Composition and Debt Amounts: Leading the lenders involved in the debt settlement is Punjab National Bank (PNB), with an outstanding debt of Rs. 2.64 billion. The other lenders include Central Bank, Indian Overseas Bank, Bank of Baroda, Canara Bank, and IIFCL. The cumulative aggregate debt of all these lenders amounts to Rs. 9.88 billion.
NARCL’s Acquisition Progress: NARCL has already acquired 18 stressed accounts worth Rs. 925.10 billion by the end of the fiscal year 2024. Additionally, it is estimated that another 24 accounts, totaling Rs. 760 billion, are in the pipeline for acquisition in the current fiscal year. However, the progress of NARCL’s operations has been relatively slow, considering it is the first government-backed bad bank in India. As NARCL continues to address non-performing assets and initiate debt resolutions, the successful settlement of Essel Infraprojects’ debt provides a strong foundation for its operations. The acquisition of the Ludhiana-Talwandi Toll Road debt signals the initial steps towards stabilizing the financial sector and nurturing economic growth in India.
