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    IDFC Bank sells 12 power sector loans to Edelweiss ARC at one fourth price

    Synopsis

    The merger between Capital First and IDFC Bank is likely to be effective by the end of this calendar year.

    IDFC
    The merger between Capital First and IDFC Bank is likely to be effective by the end of this calendar year.
    IDFC Bank has sold 12 power sector loans of Rs 2,500 crore to Edelweiss Asset Reconstruction Company in a bid to clean its books before its merger with financial company Capital First is effective, two senior officials said.

    The assets sold to the ARC include Monnet Power, Jaiprakash Power Ventures and GVK Industries (Goinwal Saheb), said the officials who requested not to be named.

    The assets were sold at one fourth the price in an all cash deal, they said.

    “There was a Swiss challenge auction held last week wherein Edelweiss emerged as highest bidder,” one of the officials said. “The transaction closed early this week.”

    The merger between Capital First and IDFC Bank is likely to be effective by the end of this calendar year.

    IDFC Bank confirmed the transaction. “Over the last several quarters, the management, in its guidance to investors, has made clear its intent to reduce the portfolio of stressed assets through active resolution or sale to ARCs. This transaction is a proactive step in that direction,” the Mumbai-based private sector bank said in an email response to ET. “As already shared with the market, IDFC Bank expects to have fully cleaned up its legacy portfolio of stressed assets by the end of the current quarter,” it said.

    Senior officials from Edelweiss ARC declined to comment on the matter.

    Officials quoted earlier said the list of assets sold to the ARC included V S Lignit, Wind World India and NSL Renewable Power.

    Most banks are worried about the power sector with 34 large accounts in distress. Over the last few months, banks have referred 18 power sector accounts to the bankruptcy court since there were unable to find any resolution for them. Five more accounts are likely to be referred to the bankruptcy court as an outcome of a Reserve Bank of India circular in February. The central bank had directed lenders to refer all stressed power sector accounts with more than Rs 2,000 crore loans to the bankruptcy court if not resolved within 180 days of default.

    Association of Power Producers had moved the Allahabad High Court against the RBI circular, stating that it was too harsh and they should be given longer time to resolve the loans. The court has declined to grant a stay on RBI’s order but has directed the government to begin a consultative process with the central bank with regard to Section 7 of RBI Act that allows government to give directions to banking regulator in public interest.


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