Six asset reconstruction companies, including Aditya Birla and Kotak Mahindra-backed ARCs, have accumulated 55% of KSK Mahanadi Power’s ₹29,330-crore debt from lenders in separate transactions, according to disclosure made by the stressed thermal power company’s resolution professional. The ARCs brought over ₹16,168 crore in loans in the hope of future demand for thermal power companies, which would give them a significant upside. Meanwhile, lenders have decided to exit the company due to a delay of over four years in its debt resolution.
In the latest deal, Prudent ARC acquired ₹156 crore of debt from Punjab & Sind Bank (PSB) in an all-cash deal of ₹125 crore, resulting in an 80% recovery for the lender. This deal came after a failed attempt by PSB to sell the same debt in February for ₹95 crore, which would have resulted in a 57% recovery. The decision to fix the reserve price was influenced by the rising cash accumulated by KSK Mahanadi Power, which currently has around ₹8,500 crore.
Prudent ARC already has ₹914 crore in admitted claims in KSK Mahanadi Power, following the acquisition of debt from banks and other ARCs, reveals data disclosed on the company’s website. However, senior officials at Prudent ARC declined to comment.
Aditya Birla ARC holds the largest share of 33.38% in claims from KSK Mahanadi Power, followed by ASREC (India) Ltd with 11.98% and Prudent ARC with 3.82%, as per disclosures by PwC-backed resolution professional Sumit Binani. Other ARCs, such as Kotak Mahindra Bank Phoenix ARC, Rare ARC, and Asset Reconstruction Company of India (Arcil), hold 2.92%, 2.10%, and 0.98% of the debt respectively.
The ARCs acquired loans from some of the largest lenders, including State Bank of India, Bank of Baroda, Punjab National, Axis Bank, and Life Insurance Corporation, who often have a significant say in the debt resolution of companies undergoing restructuring. With 55% of the debt held by the ARCs, they will also have voting rights to that extent and will possess a veto over any proposal put for a vote.
According to the Insolvency and Bankruptcy Code (IBC), a resolution requires at least 66% of lenders to vote in favor, while a proposal is rejected if less than 34% oppose it.
KSK Mahanadi Power has two ancillary companies undergoing insolvency proceedings separately, namely KSK Mahanadi Water and Raigarh Champa Rail. The resolution of the thermal power company has stalled since June 2022 after the National Company Law Tribunal (NCLT) stayed the sale process following a lender’s plea to consolidate the resolution of KSK Mahanadi Power and its two ancillary companies.
