Banks ask JPVL promoter to bring in Rs 2,000 crore equity in recast plan

In the crisis-ridden power sector, banks are for the first time retaining the debt-plagued promoter in their restructuring plan.

Manoj Gaur, the promoter of Jaiprakash Power Ventures (JPVL), will continue to own the company but will need to infuse equity of around Rs 2,000 crore as banks get to reduce their stake from 49% to 22% in the power plant, a source familiar with the development said.

JPVL has around Rs 10,000 crore of debt.

Gaur will hike his stake to over 51% stake in JPVL once the recast is complete. The promoter holding is 29.85%, as per data provided by the company to the stock exchange until December 31, 2018.

The restructuring plan proposed by the bankers will need to get the nod from Life Insurance Corporation, which is also one of the lenders, a senior banker told DNA Money. A decision is expected to be taken in the insurer's Board meeting on February 22.

For the resolution process to start kicking in, the company will have to infuse equity equivalent of 20% of the debt. To salvage his stressed firm, Gaur has agreed to the lenders' directive of selling some of the prized assets including the transmission plant and the klinker plant. He will also plough back the future receivables of the power companies.

"This is a unique case in which we are agreeing to go with the existing promoter under the restructuring plan. But we have directed the promoter to settle 20% of the debt by March," the source said.

In cases like SKS Power, GMR Power Chhattisgarh and Bhushan Power and Steel, banks have preferred to change the promoters.

As per the 15-year resolution proposal, the debt of JPVL, the power generation subsidiary of Jaiprakash Associates, will be restructured by converting nearly 50% of it into equity. Besides this sustainable long-term debt, 30% will be converted into long-term quasi-equity instruments which will be held by banks.

JPVL owns and operates three power projects -- 400 megawatt Vishnuprayag Hydroelectric project, 1320 mw (2X660 mw) super critical technology coal-fired Nigrie Thermal Project and the 500 mw Bina Thermal Power Project. While both Vishnuprayag and Bina are doing well, Nigrie with the largest debt of Rs 7,000 crore, got into financial trouble after its coal mine was cancelled and the plant failed to have a power purchase agreement (PPA).

"The promoters are cooperating with all the demand of the bankers. We are hoping that they will tie up the finance by end of this financial year itself," a banker told DNA Money.

"In the meantime, JPVL disclosed that ICICI Bank has filed an application with National Company Law Tribunal (NCLT), Ahmedabad, for initiating the corporate insolvency resolution process. The next date of hearing is February 25. Further, one of the lenders has referred the recovery proceedings in Debt Recovery Tribunal-III, Delhi. Also some of the lenders have advised the company to pay back their entire dues without which they will be constrained to take legal action including under the provisions of Sarfaesi Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002). The company has suitably responded to the same," said Manoj Gaur, chairman of JPVL, in a regulatory disclosure.

The company has an aggregate power generation capacity of 2,220 mega watt (mw) comprising 400 mw of hydropower and 1,820 mw thermal power in Madhya Pradesh.

Lenders had invoked strategic debt restructuring during financial year 2016-17 as per Reserve Bank of India (RBI) guidelines for stressed assets. Consequent to that the company had allotted 305.8 crore equity shares at Rs 3,058 crore in February 2017 to banks and financial institutions upon conversion of part of their outstanding loans and interest.

"The lenders' shareholding stood at 51% as on February 18, 2017, which stands reduced to 49.25% as on December 31, 2018, of paid-up capital of the company. The lenders, who are holding equity share capital, had to offload the shareholding as per RBI guidelines," Gaur said in the regulatory disclosures.

"The lenders had invited bids for divestment of a part of their equity in the company. Since the response was not satisfactory, lenders closed the process," Gaur added.

JPVL's loss narrowed to Rs 95.89 crore in the December 2018 quarter as compared to the year-ago period, mainly due to better revenues and lower expenses. Its standalone net loss was Rs 194.41 crore in the quarter ended December 2017. The company's total income rose to Rs 998.67 crore in the quarter from Rs 970.17 crore a year ago. Total expenses came down to Rs 1,079.47 crore in the quarter, from Rs 1,192.58 crore a year ago.

POWER PLAY

• The restructuring plan proposed by the bankers will need to get the nod from Life Insurance Corporation, which is also one of the lenders
   
• To salvage the fate of his stressed firm, Gaur has agreed to the lenders' directive of selling some of the prized assets including the transmission plant, the klinker plant and future receivables of the power companies