State Bank of India (SBI) has classified debt-laden Jaypee Associates as a non-performing asset (NPA) and lenders will soon meet to decide on converting debt to equity under Reserve Bank of India’s (RBI) strategic debt restructuring (SDR) provisions, a senior bank official said on Friday.
The official said Jaypee became a non-performing asset (NPA) some time back and the bank’s exposure to the account is around Rs 7,000 crore. Jaiprakash Associates had consolidated debt of Rs 58,250 crore in FY16.
The comments by the official came amid reports that the joint lenders’ forum (JLF), led by private sector lender ICICI Bank, has decided to convert its debt into equity through the SDR route.
The lenders have also reportedly decided to invoke the provisions at a meeting on Tuesday after uncertainties over a Rs 15,900 crore deal in which Aditya Birla Group company Ultratech Cement was to take over Jaypee’s cement assets.
UltraTech and Jaiprakash Associates had signed an agreement for the sale the cement division, which has capacity of 21.2 million tonne in factories located across five states.
Under SDR guidelines, lenders have 18 months from the date the SDR scheme is effective to find a buyer for the company. Should banks fail to usher in a new promoter, the asset would be classified as an NPA.
SDR rules allow banks to convert debt at a price below the current market value or an average of closing prices during the 10 trading days before the JLF’s decision. They can now own at least 51% of the equity of the company.
Following rules put out by the RBI in June 2015, bankers have decided to try out restructuring for a handful of companies including Electrosteel Steels, Jyoti Structures, Lanco Teesta Hydro Power, Monnet Ispat, Coastal Projects, IVRCL, Gammon India and Visa Steel.
Present tense
– State Bank’s exposure to the Jaypee account is around R7,000 crore, a bank official said
– Jaiprakash Associates had consolidated debt of Rs 58,250 crore in the previous fiscal
– SDR rules allow banks to convert debt at a price below the current market value
