addiction industries: Alok lenders could recover Rs 5,050 cr as RIL steps in

Mumbai: Lenders should expect to recoup Rs 5,050 crore from the sale of the bankrupt company to Reliance Industries () early next week after India’s most valued conglomerate injected the 500 crore of Rupees pledged in the indebted borrower. State Bank of India, and are funding the remainder of the Rs 4,550 crore acquisition cost through a term loan that will be syndicated to other banks later, four people familiar with the deal said.

SBI is lending Rs 1,800 crore, while IndusInd Bank and ICICI Bank are loaning approximately Rs 1,400 crore each for a loan to Alok, which will be backed by RIL, the people said. “Now that the equity has arrived, we will go ahead with the documentation on Monday and expect to close this deal by Tuesday when the money is expected to arrive,” said one of the people named above.

The closure has been delayed since March 2019, when the Ahmedabad magistracy of the National Company Law Tribunal (NCLT) approved RIL-JM Financial ARC’s single offer for the takeover of Alok.

The banks sanctioned the loans some time ago, but were waiting for RIL to inject capital into the business first. In a stock exchange notice on Saturday, RIL said it had taken a 37.7% stake in Alok and could further increase its stake through optionally convertible preference shares (OCPS). RIL infused Rs 250 crore for the 37.7% stake while the remaining 250 crore was transferred to OCPS issued at 9%, RIL said in the notice.

RIL is also borrowing for this acquisition through Alok for which it has given supply guarantees. “These guarantees will improve the company’s default rating to around AA +, which will reduce provisions for banks. We expect the rating action to arrive soon and therefore are very comfortable with making this loan. After the credit ratings improve, we plan to resell the loans to other banks, ”said the second person cited above.

SBI, the lead bank, initiated insolvency proceedings against Alok in June 2017. It was among 12 accounts with outstanding loans over Rs 5,000 crore that the RBI asked lenders to refer to. to the NCLT process. Alok Industries, based in Silvassa, is a fully integrated textile company, active in the cotton and polyester segments.

The company owes the lenders a total of Rs 30,000 crore, which means that the banks are adopting a collective haircut of 83%. The majority of the Rs 30,000 crore contributions are paid to financial creditors, with the company owing Rs 624 crore to operational creditors.

“RIL bought the company for less than 20 cents and despite the one-year delay that the banks are facing this makes sense given the likely rating upgrade and the fact that this company is in hands. able to run the business well, ”said a third person cited above.

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