Bank of India (BoI) on Wednesday put on sale its exposures to Essar Steel, Bhushan Power and Steel and Alok Industries along with 38 other non-performing assets (NPAs) worth a total Rs 8,831 crore. Although Essar Steel has attracted a fairly reasonably bid of Rs 42,000 crore from ArcelorMittal, BoI is probably concerned about the delay in the resolution process. All three accounts, part of the Reserve Bank of India’s (RBI) first list of large NPAs, remain unresolved over a year since the list was issued amid several rounds of litigation. BoI’s exposure to Essar Steel, including foreign currency loans to its Cayman Islands subsidiary, stands at Rs 1,492 crore.
The Bhushan Power exposure includes foreign currency loans extended through the bank’s Hong Kong, New York and Tokyo branches and adds up to Rs 2,441 crore. BoI’s exposure to Alok Industries is Rs 621 crore. Last week, State Bank of India shelved its plan to sell its over Rs 12,000-crore exposure to Essar Steel following a National Company Law Appellate Tribunal order on Friday. In June, Bank of Baroda had moved to sell its Rs 1,200-crore exposure to the indebted steel company.
BoI has also put on the block a bunch of exposures to companies named on the central bank’s second list, including Asian Colour Coated Ispat (Rs 191 crore), Jai Balaji Industries (Rs 124 crore), Orchid Chemicals and Pharmaceuticals (Rs 340 crore), Uttam Galva Steel (Rs 199 crore), Visa Steel (Rs 67 crore) and Wind World (India) (Rs 126 crore). Also on the list is GMR Chhattisgarh Energy (Rs 562 crore), which is one of the 11 large power accounts lenders and power producers are trying to resolve, and Binani Cement (Rs 61 crore).
All the accounts are being offered on a 100% cash basis and for the Bhushan Power and Essar Steel accounts, BoI also intends to retain an equity stake to benefit from an upside. So far, a full resolution has been reached only in the cases of Bhushan Steel, Electrosteel Steels and Monnet Ispat & Energy from the first RBI list of 12 accounts.
While excessive litigation has delayed the resolution in some accounts, others, such as seven of the 11 large power projects have not achieved resolution because of a lack of consensus among lenders. As a result, banks continue to resort to sales to asset reconstruction companies (ARCs). The only large account of over Rs 2,000 crore to be resolved outside the insolvency court before the RBI-mandated deadline of August 27 was Bombay Rayon Fashions, which was sold to JM Financial ARC at a 60% haircut.