With the amalgamation of IDFC Bank with Capital First now at an advanced stage, the private sector lender is looking to clean up its books and has reportedly sold over Rs 2,400 crore of stressed assets to Edelweiss Asset Reconstruction Company in the second quarter of this fiscal. But it has taken a steep loss of 75% on the exposure in the bargain.
This news comes just a week after IDFC Bank reported a net loss of Rs 369.69 crore for the September quarter due to higher provisioning. Of the total provisions of nearly Rs 601.38 crore in Q2, more than half was due to reclassification as per regulatory norms.
According to The Economic Times, the bank sold its stressed assets on a full cash basis in two separate transactions. Loans to a pool of 12 companies, including GVK Gautami, GMR Rajahmundry, Monnet Power and Coastal Projects - totalling Rs 2,335 crore - was sold in August for Rs 621 crore.
Then, loans to the tune of Rs 70.45 crore to two companies under HS Narula's DS Group were sold to Edelweiss for just Rs 1.6 crore, a discount of about 98%. Of this, Rs 40 crore was loaned to DSC in February 2014 and secured by personal guarantee provided by Narula, the erstwhile promoter of Delhi Gurgaon Expressways. The bank decided to sell these loans after invoking the personal guarantee as the recovery process was very slow.
"It was only in the absence of satisfactory progress with resolution, despite these efforts, and after exhausting these avenues for recovery, that IDFC Bank sold the loans to the ARC," said the spokesperson for IDFC Bank. Citing another senior bank official, the report added that the assets had been sold through a transparent process, and the Swiss Challenge Method had been followed to obtain the best price for them, where participants were given the opportunity to improve upon the best bid.
RK Bansal, managing director of Edelweiss ARC, told the daily that some of the large assets involved in transactions were gas-based power plants that had a lower valuation, and were acquired through an open auction process.
Edelweiss has reportedly already started witnessing good recovery from these assets in the last two months. "We were negotiating with the DS Group for settlement. The ARC is expecting to settle with DS Group for around Rs 15 crore," Bansal added.
(Edited by Sushmita Choudhury)