Uncertainty over strategy of JPVL lenders clouds Jaypee Associates' debt resolution

Uncertainty around the future strategy of lenders to
Jaiprakash Power Ventures Ltd
(JPVL) could prove a hurdle in the corporate
debt resolution
of
Jaiprakash Associates Ltd
(JAL), the holding company of the Jaypee Group, people familiar with the matter said.
JPVL - a listed associate of JAL with a
market capitalisation
of over ₹12,000 crore - is the most valuable asset in JAL's portfolio that also includes real estate, cement and fertiliser plants.
As part of a debt restructuring, JPVL issued compulsory convertible preference shares (CCPS) worth ₹3,800 crore to its lenders in 2019. Upon their conversion into shares, the lenders could emerge substantial shareholders of JPVL.
JAL only has a 24% ownership in JPVL as of March end, and 79.2% of promoter shares were pledged as collateral for loans. Bidders of JAL - including some of the largest corporate names - are unclear if and when banks plan to exercise their right to convert the CCPS into shares, people cited above said.
The debt restructuring agreement left the timeline for conversion of the CCPS into shares open-ended. They can be converted into shares anytime "after 20 years or earlier," according to the documents. The potential bidders are now seeking clarity from lenders on their conversion plans, arguing that this information is crucial to calculate the value of the holding company when bidding, the sources said.
Government-backed National Asset Reconstruction Company Ltd (NARCL), to whom the JAL's lenders have assigned their debts, did not respond to ET's queries until press time Tuesday.
Twenty-five entities including
Adani Enterprises
,
Vedanta
, GMR, Dalmia Cement Bharat, Naveen Jindal and BC Jindal group companies, Suraksha Realty, and Kotak Alternate Assets have shown interest in bidding for Jaiprakash Associates.
"As the public shareholding of
Jaiprakash Power Ventures Ltd
is very high, the conversion of CCPS could further dilute the holding company's stake in JPVL," said Drushti Desai, partner at chartered accountancy firm Bansi S Mehta & Co.

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