Jaiprakash Associates-ICICI deal: Other lenders write to private lender seeking details of pact, says report

Two days after the diversified infrastructure company Jaiprakash Associates Limited (JAL) said it had entered into a settlement pact with ICICI Bank wherein it would transfer more than 18.9 crore shares to the lender to pay off its debt, a fresh report has noted that other lenders were not aware of the pact. The lenders, forming a 32-bank consortium, have written to ICICI Bank on how the bank is going ahead with this plan, while other lenders are awaiting a resolution, the Economic Times reported on Thursday.

Jaiprakash Associates owes a group of 32 lenders a total of Rs 29,272 crore. The company was among the 26 defaulters that the Reserve Bank of India (RBI) had directed to be taken to the bankruptcy process in 2017. At that time, ICICI Bank had filed an insolvency petition at the Allahabad Bench of the National Company Law Tribunal. That petition is still pending for admission.

Jaiprakash Associates’ latest shareholding disclosure shows its promoters held a 37.7 per cent stake in the company, of which 20.46 per cent was pledged as of September 30, 2023. These amounted to 18.93 crore shares of the company, representing 7.71 per cent of the total equity shares that were pledged.

On November 14 it was announced in an exchange filing that JP Associates’ 18.93 crore shares will be transferred with mutual consent to ICICI Bank, were already pledged with the bank. “With a view to give thrust to the ongoing efforts of the company to reduce its debt, the company, along with trusts holding 18,93,16,992 equity shares of the company have entered into a Settlement Agreement with ICICI Bank (lender) to transfer the said shares to lender," the exchange filing said.

The price at which the shares would be transferred was not disclosed, as Jaiprakash Associates noted that it would be based on the trading price prevailing at the National Stock Exchange (NSE) on the day prior to the transfer of stake.

“The value/consideration of the said shares shall be arrived on the basis of the closing price at National Stock Exchange of India Limited on the day prior to the day of actual transfer of shares to the demat account of the lender," it stated.

The pact with ICICI Bank has surprised other bankers who have struggling to get some amount out of the company.

"The latest action by ICICI Bank has come as a surprise to other lenders as they have been struggling to get something out of this account," a banker told ET who is involved in the recovery of the debt from JAL.

"Technically speaking, ICICI can't go ahead with any settlement unless permitted by the RBI because this insolvency was initiated by the central bank. The question also is whether this settlement is financially feasible," the official added.

ICICI Bank’s principal exposure to Jaiprakash Associates is approximately Rs 3,000 crore, which has been fully provided in the books of the bank. The second largest exposure is by IDBI Bank with Rs 1,836 crore.

Another banker said: "Since this is such an old case, lenders are unsure of how ICICI Bank has got the power to sell these shares. Nothing like this was discussed in the joint lenders' forum. So, bankers have asked ICICI how they have decided the pact."

In its latest update last week, JAL said it has overdue of Rs 4,258 crore on its loans as of October 2023. It said it expects to reduce debt by Rs 18,682 crore due to transfer of some real estate to a special purpose vehicle after NCLT's approval of the same.

Jaiprakash Associates operations

On December 21, 2019, Yamuna Expressway Industrial Development Authority (YEIDA) had cancelled the allotment of 1,000 hectares to Jaiprakash Associates after it defaulted on payments amounting to Rs 3,621 crore. JP Associates had challenged this, but in July this year, the Allahabad High Court rejected its proposal to sell its land and pay the land cost dues owed to YEIDA.

Dalmia Bharat's acquisition of Jaiprakash Associates' cement assets for Rs 5,666 crore- which was to help resolve a chunk of the large debt burden- is also facing legal hurdles due to a shareholder dispute at one of the joint-venture plants involved in the deal.

The NCLT has ordered a freeze on Jaypee's shareholding in Jaypee Bhilai Cement, a joint venture between Jaiprakash Associates and Steel Authority of India Limited (SAIL).

Shares of Jaiprakash Associates were trading at Rs 20.72, up by 2.78 per cent, at 10.20 AM.

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