MC: Edelweiss group acquires Navayuga group’s road assets in north-east India for $150 million

7 June 2020: The Edelweiss group, on June 7, announced the buyout of two annuity road assets in north- east India from engineering and core infrastructure player Navayuga Engineering ,the flagship entity of the Hyderabad based Navayuga group which is in deleveraging mode.
“The buyout has been struck for an enterprise value of nearly $150 million,” a source with knowledge of the matter told Moneycontrol. The transaction is one of the first infrastructure deals to be closed during the ongoing lockdown.

With the government’s thrust on boosting economic activity in north- east India, The Dhola and Dibang roads are of strategic importance as they ensure seamless all-weather connectivity between north- east and the rest of India. The Dhola bridge – the country’s longest river bridge, inaugurated by Prime Minister Narendra Modi in 2018 has opened new doors for economic development to both the states of Assam and Arunachal Pradesh.
The assets, namely Navayuga Dhola Infra Projects Limited (in Assam) and Navayuga Dibang Infra Projects Private Limited (in Arunachal Pradesh) have been acquired by the Edelweiss Group’s alternative investment fund Edelweiss Infrastructure Yield Plus and its portfolio company Sekura Roads Ltd.

Edelweiss Infrastructure Yield Plus which was floated two years back has gradually emerged as one of the most active domestic acquirers in the infra segment and now manages assets worth $1.5 billion. It competes with the likes of IndiGrid, Cube Highways and funds like GIC, KKR & Actis.
The fund is present in the transmission, road/highways and renewable energy segment and looks at helping Indian infrastructure companies to recycle their capital and focus on their core construction business. In June 2019, it acquired two transmission assets from Essel Infra and in January 2020, it acquired a 74 percent stake in French gas and power utility Engie’s solar assets in India.

Edelweiss Alternative Asset Advisors which manages Edelweiss Infrastructure Yield Plus has an AuM of over Rs. 28,000 crores. It focuses on providing long term growth capital to corporates. “Acquiring operating infrastructure assets provides impetus to the revival of the sector by helping construction companies to release capital and de-lever, enabling them to commence new projects which contribute to nation building and is becoming the core model to meet India’s infrastructure capital requirement,” said Hemant Daga, Deputy CEO – Edelweiss Global Investment Advisory

“We are happy to see the acquisition of these high-quality road assets to the Sekura Roads portfolio. This is in line with our strategy of investing in Infrastructure assets which can deliver predictable long-term yield to our investors. We now have a healthy portfolio of operating transmission and operating annuity road assets,” said Subahoo Chordia, Head of Edelweiss Infrastructure Yield Plus.

Chordia was previously associated with the group’s investment banking business and has spent two decades in the infrastructure sector.
Sachin Bhansali, CFO – Navayuga group, added “Navayuga group is looking to de-leverage its balance sheet and asset monetization is a critical component. This transaction will significantly ease out the debt position of the group and help free up cash.”

Source: moneycontrol

ET: Edelweiss shares crack 12% on stake sale buzz

17 July 2019: Shares of Edelweiss Financial Services cracked as much as 12 per cent in Wednesday’s session after reports that the company is looking to sell 20 per cent of its wealth business.

ET reported that US-based Kora Management is in advanced talks to buy 20 per cent in Edelweiss Wealth Management for Rs 2,000 crore, valuing the company at Rs 10,000 crore.

Edelweiss Wealth Management provides advisory distribution, broking and asset services, ESOP & margin funding.

It plans to focus on scaling its wealth management services in 2020, especially for the affluent business, as in the credit business it is looking to conserve liquidity and maintain asset quality over book growth.

It advises assets of over Rs 1 lakh crore and has a client base of over 4.8 lakh.

Edelweiss group, with businesses from wholesale financing to debt restructuring to asset management, has debt obligations, including principal and interest of Rs 6,500 crore from May 29, 2019, till September 30, 2019, against which the total expected inflows, including asset EMIs and repayments, are Rs 3,600 crore.

Also, it has a liquidity cushion of Rs 5,300 crore, including undrawn bank lines of Rs 1,300 crore.

The scrip closed 7.21 per cent down at Rs 161.55 on BSE.

The Economic Times reported

LM: Icra cuts long-term debt rating of Piramal Capital, Edelweiss firms by a notch

27 June 2019: Credit rating agency Icra Ltd on Wednesday cut the long-term debt rating of Piramal Capital and Housing Finance Ltd and Edelweiss group companies by a notch, citing risks from loans to the real estate sector and difficulty in raising funds.

The move, which comes in the midst of a liquidity crunch at non-banking financial companies (NBFCs), could raise the cost of money for the two non-bank lenders.

Icra cut the rating on debentures of Edelweiss Financial Services Ltd (EFSL), the group holding company, by a notch from AA to AA- because of increased vulnerability in its wholesale lending book and risks of increase in stressed exposures. AA- denotes higher credit risk and default probability compared with AA.

The rating company also withdrew EFSL’s current ratings of both short- and long-term facilities, which include commercial paper worth ₹6,350 crore.

Icra also downgraded the long-term ratings of distressed assets investor Edelweiss Asset Reconstruction Co. Ltd and Edelweiss Housing Finance Ltd.

Separately, Icra cut the ratings of bonds, term loans and debentures of Piramal Capital and Housing Finance Ltd (PCHFL) from AA+ to AA.

“The rating downgrade reflects the increased vulnerability in the Edelweiss group’s wholesale lending book with the heightened risk profile of the underlying assets, comprising real estate and structured debt transactions across sectors, and the consequent rise in stressed exposures,” it said.

Responding to a query from Mint, a spokesperson for Edelweiss said the group expects the business environment to improve significantly, given the Reserve Bank of India’s recent move to ease liquidly conditions.

“We are confident that the next nine months will bring a better economic environment and we will continue to manage our businesses and asset quality profile,” said the spokesperson.

“We remain well-capitalized and have enough liquidity at all times at 11-13% of our borrowings; our debt to equity ratio is reduced to 3.9 and capital adequacy ratio is 19.8%,” added the spokesperson.

A spokesperson for Piramal Enterprises Ltd (PEL), the parent of Piramal Capital, said the rating revision does not reflect any marked change in the company’s operational parameters.

“Icra had earlier upgraded PCHFL’s rating from AA to AA+ in September 2018 and with today’s revision, Icra has reverted to its earlier rating on the company. Over this entire period, Icra’s rating on PEL continues to remain AA,” said the spokesperson.

However, Icra believes that NBFCs such as Edelweiss Financial Services and Piramal Capital will find it difficult to mobilize resources at reasonable rates over the near to medium term.

The prolonged slowdown in the real estate sector and the ongoing liquidity crunch could also worsen their asset quality.

The latest downgrades follow a spate of rating revisions in the NBFC sector, stoking fears of a liquidity crisis.

It started with the downgrade at mortgage lender Dewan Housing Finance Ltd earlier this year, following payment defaults by Infrastructure Leasing and Financial Services Ltd and the resultant liquidity crisis.

Over the last few weeks, rating agencies have revised credit ratings of certain debt instruments of Reliance Commercial Finance Ltd and Reliance Home Finance Ltd to “default”, or D, on account of the deteriorating financial profile of its parent.

In April, PNB Housing Finance Ltd was also put on a rating watch, with developing implications due to its requirement for raising money to maintain comfortable capital adequacy and gearing level.

The LiveMint reported

ET: Lender trio looks to exit SARE, salvage Rs 1,000-crore exposure

18 June 2019: Three lenders to SARE Homes — KKR India Financial Services, Altico Capital and Edelweiss — are negotiating with potential suitors to either cash out or bring in strategic investors for specific projects to salvage their combined exposure of Rs 900-1,000 crore, two people familiar with the development told ET.

SARE Homes, promoted by London-based global asset and real estate management firm Duet Group, is facing severe cash crunch due to unsold inventory, which has brought construction work to a grinding halt, the sources said.

“This is a unique company…run by professionals,” said one of the persons involved in affairs of the company. “Duet is not on the board of SARE Homes and has no say in the company, and lenders have major says in cash flow.”

Duet had raised $350 million (Rs 1,400 crore then) in 2006 through equity issuance in SARE Public Company (Cyprus). Of this, about Rs 1,000 crore was invested in the Indian firm, SARE Homes, as foreign direct investment.

Spokespersons of KKR, Edelweiss and SARE Homes did not respond to ET’s email queries as of press time Monday.

A spokesperson at Altico Capital said the company currently has only a small exposure to SARE Homes for a plotted development in Chennai. “Given its strong performance and underwriting standards, Altico is in an extremely secure position for its exposure to the SARE project,” she said. Altico has just concluded its annual audit and published accounts with capital ratio more than 40%, cash balances exceeding Rs 1,200 crore and gross non-performing assets of less than 1.8%, she said.

The underlying assets of SARE Homes are much more than the total loan exposures of the three private lenders, the sources said.

As per the last valuation in March 2019, total value of unsold inventory and land is a little over Rs 2,300 crore, as against combined borrowing of less than Rs 1,000 crore, said the official quoted earlier.

SARE Homes has returned a tad below Rs 300 crore to its Cyprus holding company till 2015. But with lenders exploring various strategic options, equity capital is expected to be completely wiped out.

A consortium of KKR and Altico has taken over control of Ramprastha SARE Realty Private, Gurgaon, sources said. Lenders have combined exposure of about Rs 580 crore in the project on a 69-acre plot, of which 52 acres is under development and the rest is yet to be developed, they said. However, an official with one of the lenders said the combined exposure is less than Rs 450 crore.

In addition, Altico has virtually taken control of SARE Realty Project, Chennai GST, a 72-acre plot, of which about half is yet to be developed. Edelweiss has control of SARE Samaag Reality, Ghaziabad, and SARE Jubilee Shelters, Chennai-OMR, sources said.

SARE Homes has launched about 9,000 residential units or flats. Of this, about 6,500 units have been sold, but only about 4,000 units have been offered for delivery. That means 2,500 homebuyers are waiting for delivery and there are another 2,500 unsold inventories. All these 5,000 units will need additional capital to complete.

The company is facing cashflow pressures and cannot raise additional debt.

The Economic Times reported

FE: NCLT orders CIRP against Marg on ICICI Bank plea

30 May 2019: The Chennai Bench of the National Company Law Tribunal (NCLT) has ordered initiation of the corporate insolvency and resolution process (CIRP) against Chennai-based infrastructure company Marg, the original promoter of the Karaikal Port.

The insolvency proceeding was ordered against the company, which was into a number of infra projects including airport and metro in its hey days, on a petition filed by ICICI Bank, alleging a default of `71.69 crore.

The NCLT Bench ruled ICICI Bank has proved existence of debt and default against Marg by showing various documents and the certificate issued by the Debt Recovery Tribunal, Chennai for an amount of `71.69 crore, in favour of the bank.

“Since Marg counsel has not come out with an argument stating that debt and default were not in existence, we are of the considered view that this case is fit for admission,” the Bench said, appointing Vasudevan as the interim resolution professional (IRP).

ICICI Bank had sanctioned a rupee term loan facility of `165 crore on execution of a credit arrangement letter (CAL) dated December 31, 2009, to enable Marg to finance up to 50% contribution in the business plan of establishing Karaikal Port (KPPL) by equity participation and capital expenditure.

The terms and conditions of the said facility were changed at the request of Marg on April 7, 2010, incorporating setting up of New Chennai Township Private (NCTPL), besides Kariakal Port. Another modification was done and the loan was disbursed. The repayment of the loan was to be made in 21 equated quarterly instalments starting from July 2, 2011.

When Marg failed to repay as agreed, ICICI Bank initiated DRT proceedings upon which DRT Chennai issued debt recovery certificate in favour of the bank in 2018 for an amount of `71.69 crore, along with interest at the rate of 6% from the date of decree till the date of realisation.

The NCLT Bench observed that there is a strong case of debt and default against the company, pointing out the guarantee deed executed by by NCTPL, GRK Reddy and Rajini Reddy, the promoters of Marg.

“Though the case was filed on April 26, 2018, Marg has failed to repay the claim amount, except every time saying that it was trying for settlement,” the Bench said.

Marg has developed residential townships, airports, power utilities, ports and other infrastructure projects across the country. Later it went into problems with several of its projects getting stalled and delayed, throwing the company into financial mess.

Its flagship residential project Swarnabhoomi of 250 flats on 630 acre plunged into controversy with regards to special economic zone norms and got stalled. GRK Reddy was arrested in November 2017 in connection with cheating cases by the Central Crime Branch (CCB) in connection with the Swarnabhoomi project.

When Marg had got into trouble with `1,800-crore debt to various banks, Edelweiss ARC in 2015 bought 97% of Kariakal Ports’ debt from various banks.

The Financial Express reported

ET: ArcelorMittal executives join Essar Steel monitoring panel

15 April 2019: ArcelorMittal — whose Rs 42,000-crore resolution proposal for the Gujarat-based flat steel manufacturer was approved by the insolvency court last month — has nominated its representatives to the monitoring committee even as a couple of senior executives close to the previous management exited the firm, said a person close to the company.

The monitoring committee was put in place on National Company Law Appellate Tribunal’s directive. It consists of three executives from ArcelorMittal, three representatives from the banks, namely State Bank of India (SBI), ICICI, IDBI and Edelweiss, and Satish Kumar Gupta, the resolution professional who is also the chairman of the committee.

ArcelorMittal’s representatives are Sanjay Sharma, CEO for ArcelorMittal China & India, Kalyan Ghosh, CFO at ArcelorMittal India, and Vijay Krishna Goyal, vice president at ArcelorMittal, said the person cited At the same time, Suresh Jain, CFO of Essar Steel, gave his resignation last week. Under the new reporting structure, Jain would have had to report to Alvarez & Marsal that is acting as a mediator between the current management and the monitoring committee, and that was not acceptable to him, the source said.

Jain could not be reached for comments.

He has been associated with Essar group since 2008 when he was appointed the CFO of Essar Oil and then moved on to becoming Essar Steel’s CFO when the oil refinery was sold to Russian oil giant Rosneft in 2017.

Ghosh may be considered for the post of CFO when ArcelorMittal takes over officially, the person said.earlier.

Earlier in March, Jatinder Mehra stepped down as chief executive of the company after a 12-year stint. “My contract came to an end on March 31 and I chose not to renew the same. This has nothing to do with the ongoing (IBC) process,” Mehra told ET in an emailed response.

Mehra, 79, has been associated with the Essar Group since 1997 in various capacities.

To be sure, empirical practice in M&A deals suggests mostly the acquirer brings in his own management into the company once the deal closes.

The Supreme Court on Friday, though, stopped ArcelorMittal from paying the lenders and ordered status quo in the insolvency case until the bankruptcy tribunal decides on the proportion of amount to be paid to financial and operational creditors.

ArcelorMittal declined to comment.

Alvarez&Marsal said as a policy it did not comment on existing or potential client engagements.

National Company Law Tribunal (NCLT) Ahmedabad had given its nod to ArcelorMittal’s Rs 42,000 crore offer to lenders of Essar Steel on March 8.

Last week, NCLAT had said it may ask ArcelorMittal to deposit the amount offered by it in one or two accounts in the next hearing scheduled to be heard on April 23.

Under the insolvency resolution that has now been going on for 20 months now, Essar Steel’s capacity utilisation peaked to almost 80% at the end of March when the company crossed the 6 mt per annum production mark out of nameplate capacity of 8.4 mt.

The improvement has been driven by better operational performance as well as an overall upswing in the steel industry with both consumption and prices increasing.

A recent Indian Steel Association forecast said steel consumption in the country is set to cross the 100 mt mark this fiscal year.

“It was good to see large operating assets attracting intense competition between incumbents and new strategic majors,” said Anjani Agarwal, partner and national leader, metals and mining at EY. “While the steel industry demand should stay robust for a long time in future, the return on the investment made by new owners will always be a factor of how sustainably the assumptions on capacity utilisation, brownfield expansion and margins play out.”

The Economic Times reported

ET: Essar Steel lenders mull options after NCLAT advice

18 March 2019: Creditors to Essar Steel are weighing three options, one of which might be put before an appellate bankruptcy court on Monday, as they seek to draw to a close the insolvency proceedings that have dragged on for about two years. 

The options include asking ArcelorMittal to pay up the whole amount and keep the contentious payments to operational creditors in an escrow account or just comply with the suggestions made by the National Company Law Appellate Tribunal (NCLAT) in the last hearing on Friday. 

“The third option is to stick to our stand that this is the agreed resolution and fight on, assuming further delays. All these options are being debated but there is no consensus as yet,” said a banker with knowledge of the internal discussions. 

Lenders, especially those owned by the state, are under pressure to accept any solution suggested by NCLAT because they are desperate to close the long-pending case before the fiscal year ends . Meeting that deadline will allow them to write back against earlier provisions and escape higher ageingrelated provisions for the account. So, there is an outside chance that operational creditors may get a higher share of their dues than what now stands on paper. 

The two-judge bench had on Friday asked creditors to consider giving operational creditors 10% of the total proceeds, up from 5% considered in the agreed plan. The bench also asked lenders to consider giving Standard Chartered more of the dues than what is proposed now, suggesting a pro rata formula be applied for all financial creditors. 

If lenders agree to both these suggestions, total amount they can expect would drop to Rs 34,000 crore of the Rs 42,000 crore proposed by ArcelorMittal as operational creditors will get Rs 5,000 crore and Standard Chartered will get Rs 3,000 crore, the banker cited above said. 

“Raising the proportion for operational creditors could be considered but accommodating Standard Chartered looks difficult at this stage as it does not have a first charge over the asset,” said another executive involved in the deliberations. 

Standard Chartered was to get just 1.7%, or Rs 60 crore, of its Rs 3,500-crore dues because unlike Indian banks, it had not lent to the parent company but its subsidiary and did not have first charge on its assets. The bank had taken the company’s shares as collateral that hold no value. 

Four creditors with the largest exposures, namely Edelweiss ARC, State Bank of India, IDBI Bank and ICICI Bank, have formed a core committee to take the decision on behalf of lenders as the committee of creditors (CoC) has been technically dissolved after a decision to award the bid to ArcelorMittal was taken.

The Economic Times Reported

FE: SBI cleaning house; puts Rs 2,338-crore bad loans on sale

13 March 2019: State Bank of India (SBI) on Monday put on sale six non-performing accounts (NPAs) worth Rs 2,338 crore on sale, including its exposures to Indian Steel Corp (Rs 929 crore) and Jai Balaji Industries (Rs 859 crore).

All six assets are being offered on a 100% cash basis, with haircuts ranging between 29% and 76%. The other accounts up for sale are Kohinoor Planet Construction and Gati Infrastructure (Rs 251 crore), Mittal Corp (`116 crore), MCL Global Steel (`100 crore) and Shree Vaishnavi Ispat (Rs 82.52 crore).

The auction for Jai Balaji, Indian Steel Corporation, MCL Global Steel, Kohinoor Planet and Gati are being held as per the Swiss challenge method, based on existing offers from bidders who will have the right to match the highest bid.

Jai Balaji was one of the 29 companies listed by the RBI in its second list of large accounts sent to banks in August 2017. In 2018, SBI had filed an insolvency plea against the company in the Kolkata bench of the National Company Law Tribunal. This is the third time SBI is trying to sell its exposure to Jai Balaji since October 2017. UCO Bank and Allahabad Bank were reported to have sold their entire exposure worth Rs 1,440 crore to Edelweiss Asset Reconstruction Company (ARC) in December 2017 at a 63% haircut, with an upfront cash component of 15%.

The reserve price for the Jai Balaji account has been set at Rs 361 crore, implying that SBI is prepared to take a haircut of up to 58%.

In a report earlier this year, CLSA had estimated that the resolution of Jai Balaji through the insolvency route would entail a 69% haircut for its lenders.

Bad-loan accounts put up for sale by banks so far in the March quarter have risen to over Rs 27,700 crore as lenders rush to make cash recoveries ahead of the close of the financial year 2018-19.

The Financial Express reported

ET: RCom pledges more shares with Axis Trustee, stock falls 8%

26 February 2019: Shares of Reliance Communications fell 8.1% on Monday after Axis Trustee Services, a wholly- owned subsidiary of Axis Bank, said Anil Ambani’s Reliance Group pledged more shares of the telecom company with it. 

The Reliance Group — which had accused L&T Finance and Edelweiss Group of invoking pledged shares of its companies earlier this month, causing a sharp value erosion in their shares — further pledged 8.15 crore shares, or a 2.95% stake, in RCom with Axis Trustee, according to a regulatory filing. Previously the group had pledged 17.25 crore, or 6.24%, of the company’s shares with Axis Trustee. It pledged extra shares to make up for the fall in the value of shares given as security against loans. 

All Reliance Group companies except for Reliance Nippon Life are trading 15-58% lower since February 1. While Reliance Power shares declined 58% since the beginning of the month, Reliance Infrastructure and RCom have both lost 50%. On Monday, shares of RCom closed at ₹6.01 on the Bombay Stock Exchange. 

The trigger for the slump was RCom’s February 1 statement that it would file for bankruptcy as it had been unable to sell assets to repay debt over the past year and a half. The company has debt of about ₹42,000 crore. 

Last week, the Supreme Court held RCom chairman Anil Ambani in contempt for not paying ₹550 crore of arrears to equipment supplier Ericsson, after agreeing to do so in court. It threatened to send him to jail for three months if the company didn’t make the payment within four weeks.

The Economic Times Reported

DNA: Edelweiss ARC salvages Kohinoor project in Mumbai

20 February 2019: In the city’s real estate market which is riddled with incomplete projects, Edelweiss Asset Reconstruction Company is reviving the prestigious Kohinoor Square, a residential-cum-commercial development at Dadar. The project has been mired in litigations and construction was stalled in 2012.

The building, erstwhile Kohinoor mills, was bought by the Kohinoor group (promoted by Unmesh Joshi, son of former Maharashtra chief minister Manohar Joshi), Maharashtra Navnirman Sena chief Raj Thackeray and his business partner Rajan Shirodkar for Rs 421 crore. Thackeray exited the partnership in 2009. Kohinoor CTNL Infrastructure Private Ltd, a subsidiary of Kohinoor group, began construction of the premium residential and commercial establishment in 2009.

This is one of the rare instances where an asset reconstruction company (ARC) has taken over the debt from a clutch of banks and financial institutions to revive an incomplete real estate project. Besides taking over the Rs 1,000 crore debt, the ARC has also provided priority finance to complete the project.

In the next few months, the occupation certificates (OCs) for part of the commercial tower of the project are expected to be handed out. Few lenders like Bank of Baroda and IL&FS own some units in the commercial premise in lieu of unpaid loans.

“First, we bought the debt from various banks. After aggregating the debt, we infused additional finance of Rs 300 crore and another Rs 175 crore to complete the project. In the next few months, a part of the commercial tower of the building will be getting the occupational certificates to be handed over to the investors,” said a source at Edelweiss ARC.

The initial plan was to build a five-star hotel, the largest in Asia. But later on, the plan was revised to have two towers of 52 floors and 32 floors which will have both commercial and residential space. The construction was on schedule but litigation over the floor space index (FSI) in 2012 slowed down the project.

The Rs 2,000 crore Kohinoor project is being completed by Sandeep Shirke And Associates (SSA), a Prabhadevi-based architectural firm. Manohar Joshi’s son Unmesh, who initially owned the Kohinoor Square, lost control of the property which was one of the most ambitious real estate projects in Mumbai to SSA.

Edelweiss Asset Reconstruction company moved the National Company Law Tribunal after Kohinoor group failed to repay a mounting debt of Rs 1,000 crore in 2017. The NCLT court allowed SSA to take over the project after the resolution professional S V Ramkumar proposed the architect’s name.

IN PROGRESS

  • In the next few months, OCs for part of the commercial tower of the project are expected to be handed out  
  • Few lenders like BoB and IL&FS own some units in the commercial premise in lieu of unpaid loans

The DNA reported