IOB offloads Rs 1,900 cr Essar Steel exposure to Edelweiss ARC: Sources
It is likely that Edelweiss ARC has got the deal at 50 percent discount to book value.
The battle against bad loans shows no signs of abating, with another state-run bank now offloading its exposure in the beleaguered Essar Steel, reports CNBC-TV18.
Indian Overseas Bank has offloaded its exposure in Essar Steel to Edelweiss Asset Reconstruction Company for Rs 1,900 crore.
Sources said Edelweiss ARC is likely to have bought IOB’s stake at a 50 percent discount to its book value.
IOB is likely to have received Rs 285 crore upfront from Edelweiss ARC, which will now have Rs 5,500 crore exposure to Essar Steel post the deal.
Other banks that have offloaded their exposure in the company to asset reconstruction companies are ICICI Bank, HDFC Bank, Axis Bank and Federal Bank.
Essar Steel was among the first list of dozen companies – contributing a quarter of Indian lenders’ bad loans – that the Reserve Bank of India had identified for insolvency proceedings. Essar owes lenders roughly Rs 45,000 crore, of which Rs 31,671 crore are non-performing assets (NPAs) as on March 31.
The company in July this year had challenged the Reserve Bank of India (RBI) directive to banks to initiate bankruptcy proceedings against the company.
Edelweiss Group is lending a helping hand to Essar Steel as it may provide nearly Rs 800 crore interim financing so that the steelmaker can stay afloat during insolvency proceedings.
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