The consortium of lenders of Era Infra Engineering Ltd is considering a proposal to securitize and sell the company’s receivables worth Rs15,000 crore currently under arbitration with various clients in the government sector to an external investor, two people aware of the development said.
According to the persons cited above, who spoke on condition of anonymity, the proposal to sell the disputed receivables is part of a larger plan aimed at minimizing principal loss of the company’s outstanding debt. The proposal, presented by interim resolution professional (IRP) Rajiv Chakraborty also lists other measures aimed at improving the cash flow of the various group entities to boost the equity value of the firm by another Rs3,000 crore, which in turn, is expected to make the company more attractive to potential bidders.
Era Infra is the last in RBI’s first list of NPA accounts referred to the National Company Law Tribunal (NCLT) by banks in June last year. In May this year, that NCLT’s principal bench admitted Union Bank of India’s (UBI’s) plea seeking initiation of insolvency proceedings against the company for recovery of Rs681.04 crore, along with an overdue external commercial borrowing of $11.97 million.
As per latest corporate filings, Era Infra’s total debt at the end of March 2016, stood at Rs10,065 crore. In 2016-17, it reported a net loss of Rs1,295 crore on the back of Rs1,211 crore in revenues.
The company is promoted by Delhi-based Bharana family. Recently, the Central Bureau of Investigation (CBI) booked Era Infra’s chairman Hem Singh Bharana along with former chairman and managing director (CMD) of UCO Bank Arun Kaul, and a few others in connection with an alleged Rs621-crore loan fraud which has caused a loss of over Rs737 crore to the bank.
“The above proposals which will be taken up for discussions again in a lenders’ meeting assume significance in the wake of prevailing apprehensions over the intrinsic value of engineering procurement and construction (EPC) companies such as Jyoti Structures which are under bankruptcy but have failed to attract buyer interest,” said the first person cited above. In Era’s case, however, the lenders want to quell such a perception, this person added.
Mint reported in May that Jyoti Structures Ltd received only one bid from a group of high net-worth individual investors led by Sharad Sanghi, chief executive officer of Netmagic Solutions. The resolution plan involved an upfront payment of Rs 170 crore and the balance to be repaid over 15 years while Jyoti Structures’ current unpaid debt stands at Rs7,625 crore.
“Among the specific measures, lenders may also allow raising of priority debt for some of group’s special purpose vehicles (SPV) to attain financial closure,” said the second person. Era Infra’s three road projects are yet to achieve financial closure, after which they will be granted Provisional completion certificate to commence Commercial Operation Date (PCOD)” the second person said, adding “altogether, the three projects can generate up to Rs 240 crore in cash per annum once commercial operations begin”. Email queries sent to the State Bank of India (SBI), which is part of the consortium of lenders, remained unanswered until press time. A query sent to Rajiv Chakraborty, partner at PwC, the interim resolution professional (IRP) also did not elicit any response.
Source: Livemint, May 27, 2018