In the past two days, the stock of a prominent company engaged in engineering, construction, cement, and real estate experienced a significant decline of 10% following the initiation of insolvency proceedings by the NCLT in response to a plea from ICICI Bank.
The shares dropped to ₹11.99 per share on the National Stock Exchange, giving the company a market capitalization of ₹2,945 crore.
On June 3, 2024, the Hon’ble National Company Law Tribunal (NCLT) Allahabad Bench ordered Jaiprakash Associates Ltd. to the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, based on a petition by ICICI Bank Limited.
The Allahabad bench of the tribunal has dismissed the merger of Jaiprakash Associates Ltd with Jaypee Infrastructure Development Ltd.
Additionally, the Allahabad bench of the NCLT has admitted insolvency petitions filed by ICICI Bank in 2018 and State Bank of India in 2022 against Jaiprakash Associates Ltd (JAL) under Section 7 of the Insolvency and Bankruptcy Code (IBC).
The tribunal has ordered the initiation of the Corporate Insolvency Resolution Process (CIRP) against the debt-ridden JAL and appointed an interim resolution professional (IRP).
In 2017, the RBI identified Jaiprakash Associates Ltd (JAL) as one of the 26 major loan defaulters to be subjected to bankruptcy proceedings. Following this, ICICI Bank approached the tribunal due to JAL’s failure to repay dues amounting to approximately ₹3,000 crore.
Last month, JAL reported that on April 30, the company defaulted on repayments of a principal amount of ₹1,751 crore and interest of ₹2,865 crore.
“The total borrowing (including interest) of the company is ₹29,805 crore, repayable by 2037, of which only ₹4,616 crore is overdue as of April 30, 2024,” JAL stated.
The loans are from various banks and consist of fund-based working capital, non-fund-based working capital, term loans, and foreign currency convertible bonds (FCCBs).
JAL also mentioned that out of the total borrowing of ₹29,805 crore, ₹18,955 crore would be transferred to the proposed Special Purpose Vehicle.
In conclusion, Jaiprakash Associates is grappling with significant debt defaults, leading to insolvency proceedings initiated by lenders at the NCLT. The company’s proposed debt restructuring and asset divestment plans have encountered obstacles due to recent NCLT orders, exacerbating JAL’s financial troubles.
JAL, the flagship company of the Manoj Gaur-promoted Jaypee Group, has an asset portfolio that includes cement, hospitality, real estate, fertilizer, and construction businesses. In fiscal 2023, NARCL acquired 62%, or ₹9,234 crore, of Jaypee Infratech’s debt, offering lenders a 39% recovery following an uncontested Swiss challenge auction.
Written by Omkar Chitnis
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