With the Supreme Court staying Reserve Bank of India’s directive to banks for filing bankruptcy proceedings against defaulting borrowers, lenders are hoping to resolve at least eight power sector accounts worth ₹70,000 crore out of the 20 cases that were headed to the National Company Law Tribunal (NCLT).
Two-month window
The next hearing in the matter is in November, which means there will be a two-month window by which banks and their borrowers can work out a resolution outside NCLT.
Most of the resolutions are expected to happen through fresh infusion of equity by investors, in which existing promoters will either exit or see their stake reduce substantially.
According to bankers, out of the 20 power projects that were referred to the NCLT, eight are likely to be resolved outside the bankruptcy court. The total bank debt in these 20 projects is about ₹2 lakh crore.
Eight power projects totalling 13,000 MW, have a debt of about ₹70,000 crore and are in the final stages of resolution.
“The Supreme Court order has provided a great relief to power sector stressed assets. This would provide time for bankers to finalise a resolution plan for about 13 GW of projects which are presently in their final stages of resolution,” Ashok Khurana, director general, Association of Power Producers (APP), told The Hindu.
The power projects at final stages of negotiation with the lenders include those of Prayagraj Power, Lanco Infratech, Jaypee Power Ventures, KSK Mahanadi, Coastal Energy, Avantha Power and SKS Power.
Vishrov Mukerjee, partner at J. Sagar Associates, believes that the immediate threat of moving the NCLT now gets abated. “The projects that are close to resolution by the banks should be allowed to go through, or it becomes counter productive,” Mr. Mukerjee said.
Borrowers are also expecting a clarification from the banking regulator following the Supreme Court order. While the SC order was in respect to power, textile and shipping sectors, borrowers in other sectors are now hopeful of getting a similar relief.
“This has set a precedent, so we have also moved court for more time,” said a senior official of a construction firm. Experts said while consistency around regulation is the key to investor confidence, there are cases facing genuine issues.