Jaypee Group-owned Andhra Cements Ltd's consortium of creditors plans to start anew the debt resolution process at the distressed company after receiving poor response from bidders to their first attempt to sell the asset, three people with knowledge of the matter said.
The bidding process will also be tweaked to invite offers for loan facilities of the company instead of physical assets.
Lenders led by Edelweiss Asset Reconstruction Company Ltd received bids from NCL Industries Ltd and Sagar Cements Ltd to acquire the assets of Andhra Cements. Both were rejected because they fell below lenders’ expectations, said two of the three people on condition of anonymity.
In all, lenders received 16 expressions of interest (EoI) for Andhra Cements within the end of June deadline for the sale of two cement plants, but only NCL Industries and Sagar Cements submitted offers within the deadline of 14 September, the two said.
Both offers were below Rs 600 crore and were accompanied by multiple conditions, the people said. Andhra Cements has fund-based exposure of Rs 1,200 crore including working capital loans and interest accrued on loans to lenders as of 31 March 2021, according to annual results published on the Bombay Stock Exchange on 26 June this year.
NCL Industries, Sagar Cements, Shree Cement, Deccan Cements Ltd, Chettinad Cement Corp. Ltd, Star Cement Ltd, PNC Infratech Ltd, Rashmi Group, Shree Laxmi Narsinha Sugar LLP, My Home Industries Pvt. Ltd and Fortuna Engineering Pvt. Ltd were among the entities that submitted EoIs, said one of the three persons.
Piramal Enterprises Ltd and Bain Capital-backed India Resurgent Fund, Aditya Birla Stressed Fund, Eight Capital, Edelweiss Stressed Asset Fund and U V Asset Reconstruction Company were among the strategic investors to submit EoIs, the same person said.
While NCL Industries Ltd's bid was linked to enterprise value, Sagar Cements made a non-binding bid, the first person said. Shree Cements sought additional time to submit a bid, but lenders rejected the request.
In a fresh attempt, Andhra Cements lenders will invite bids for their loan facilities unlike the recent sale process wherein lenders invited bids for assets of the company, said the second person.
The loan facilities are secured by plant and machinery, pledge of promoters’ shares, and the personal guarantee of promoter Manoj Gaur, according to the company’s annual report.
Lenders are likely to launch a fresh debt sale process next month either through an open auction or a Swiss auction, the second person said. In the Swiss system, any bidder makes an unsolicited but binding bid. Once approved, the auctioneer seeks counter proposals from other bidders and chooses the best one on the table.
Besides Edelweiss ARC, other consortium lenders include Union Bank of India, Karur Vysya Bank and State Bank of India.
The lenders led by Edelweiss ARC has appointed Grant Thornton as advisor for the transaction, as reported by Moneycontrol.com in June this year. The company disclosed to the Bombay Stock Exchange on 27 May that the board approved the lenders’ proposal to sell the two cement plants located in Andhra Pradesh.
Andhra Cements started missing payments to lenders sometime in 2017. Edelweiss ARC has acquired nearly 80 percent of the total debt over the last four years. In March 2021, the ARC acquired from housing financier HDFC Ltd a Rs 367-crore principal secured loan, the first person said. A part of the agreed sale value was paid in cash while the remaining was paid in the form of security receipts, according to one of the persons quoted above. Edelweiss ARC acquired Andhra Cements’ loan from HDFC in a bilateral deal at 40 paise on the rupee, the same person said.
Edelweiss ARC also acquired a Rs 365 crore principal secured loan from IDFC in 2017 as a part of a portfolio sale by the financial institution comprising 14 companies with outstanding loans of Rs 5,000 crore. The ARC had acquired IDFC’s portfolio for 44 paise on the rupee, according to media reports.
The deal with IDFC was based on a 15:85 structure wherein 15 percent of the transaction value was paid in cash and for the remaining 85% the ARC issued security receipts which would be redeemed based on the recoveries made by the ARC.
India RF declined to comment. NCL Industries, Sagar Cement, Shree Cements, Edelweiss ARC and Aditya Birla group did not respond to requests for comment.