SBI plans to sell loans of Bombay Rayon
State Bank of India (SBI)—the lead banker in a lenders’ consortium to Bombay Rayon Fashions Ltd—plans to sell loans of Bank of India (BoI), Allahabad Bank and Karnataka Bank to an asset reconstruction company (ARC), said two bankers aware of the transaction.
One of the bankers cited above said the consortium has decided that the loans would be consolidated across lenders before selling it to an ARC.
“SBI’s exposure is being sold to JM Financial ARC, other banks could also sell it to JM as one consolidated loan,” the banker said. The transaction will be handled by SBI’s Stressed Assets Resolution Group founded under its chairman Rajnish Kumar last October.
SBI and Bank of India did not respond to emails seeking comments. Allahabad Bank and Karnataka Bank couldn’t be reached for a comment. Bankers have been trying to resolve their dues to Bombay Rayon, which posted net loss of ₹282 crore on revenue of ₹3,088 crore in the last financial year.
The second banker cited above confirmed that JM Financial ARC is acquiring loans of SBI. “We have given the mandate to SBI, the lead lender, and consolidating our loans and selling them to an ARC will lead to faster recovery,” the banker said, adding SBI Caps will handle the due diligence.
BoI has loans outstanding of ₹127 crore to Bombay Rayon, while Allahabad Bank and Karnataka Bank have exposures of ₹108 crore and ₹13 crore, respectively. Allahabad Bank and Karnataka Bank want to sell their loans for cash, while BoI is keen on a mix of cash and security receipts in the ratio of 90:10.
SBI said in a public notice on Saturday that Bombay Rayon’s assets will be sold off under the Swiss challenge method, under which an existing price offer can be matched or beaten by another offer.
Mint reported on August 22 that JM Financial Asset Reconstruction Co. (ARC) has offered to acquire SBI’s loan to Bombay Rayon’s in a ₹900 crore full-cash deal. SBI has a ₹2,260 crore exposure to Bombay Rayon, meaning India’s largest bank will have to accept a 60% discount if it agrees to the deal.
MUMBAI: