JM Financial ARC seeks to buy out SBI’s loan to BRFL

SBI may have to accept a 60% discount to ₹2,260 cr exposure

MUMBAI: JM Financial Asset Reconstruction Co. (ARC) on Monday offered to buy out State Bank of India’s (SBI) loan to Bombay Rayon Fashions Ltd (BRFL) in a ₹900 crore full-cash deal, two bankers aware of the matter said.

SBI has a ₹2,260 crore exposure to Bombay Rayon, meaning India’s largest bank will have to accept a 60% discount if it agreed to the deal.

“Banks like SBI are ready to sell these accounts at attractive reserve price as they have made higher provisions against these accounts. These banks are now willing to appreciate the expectations of asset reconstruction companies (ARCs) and investors,” said Eshwar Karra, chief executive officer, Phoenix ARC Pvt. Ltd.

On August 2, SBI had put up the account on sale, along with its ₹229 crore exposure in Kolkata-based Shivam Dhattu Udyog Pvt. Ltd. Phoenix ARC has offered a ₹77 crore full-cash deal

for the latter, indicating a haircut of 66%, said the second banker cited earlier.

JM Financial ARC and SBI declined to comment.

The offer comes ahead of an August-end deadline, after which the accounts must be referred for bankruptcy proceedings

in the National Company Law Tribunal (NCLT). The deadline has forced banks to accelerate finalising resolution plans for stressed accounts.

As of end-June, banks held a 55% stake in Bombay Rayon, with SBI holding 29.28%, Axis Bank 8.04%, Union Bank of India 3.35% and other banks like Bank of India, Punjab National bank, Central Bank of India and Allahabad Bank holding a minority stake.

The Agarwal family holds 38.3% stake in the company.

According to Bombay Rayon’s fiscal 2016-17 annual report, JM Financial ARC had earlier picked up the loan exposure of ICICI Bank in the company.

Lenders had proposed to restructure the company in the past under different schemes like the Scheme for Sustainable Structuring of Stressed Assets (S4A) and corporate debt restructuring. At the end of March 2017, banks held 28% stake in the company which was raised to 55% by the end of June 2017, after it converted unsustainable debt into equity under S4A.

On February 12, 2018, RBI withdrew all debt restructuring schemes such as S4A, strategic debt restructuring schemes, CDR and 5:25 refinancing scheme, forcing banks to finalise a resolution plan in six months before it is referred to NCLT.