On July 5, the Union Bank of India conducted a Swiss Challenge auction to address complications in five non-performing assets (NPAs): Gujarat Narma, Golden Forest Ltd., Shreemati Vineyards Ltd., Rattan India Power Ltd., and Monnet Ispat & Energy Ltd. The auction drew significant attention, particularly for the Jaypee Healthcare account, which received counter bids, highlighting the bank’s strategy to tackle its NPAs.
Introduction to the Auction
Non-performing assets constitute a major problem in many organizations, and the Union Bank of India has endeavored to manage them for a sound financial structure. The Swiss Challenge auction, a technique where the public sector lender invites counter bids against a current bid, was conducted for five troubled loans. This approach ensures transparency and facilitates maximum recovery.
Highlighting Jaypee Healthcare
Among the five accounts, Jaypee Healthcare received counter bids. Delhi-based Shine Star Build-Cap emerged as the highest bidder with an offer of Rs 72 crore, while Suraksha Asset Reconstruction followed with a bid of Rs 65 crore. Previously, JC Flowers Asset Reconstruction had submitted a binding bid of Rs 61.8 crore during an e-auction on June 27. Union Bank has given JC Flowers until July 11 to match Shine Star’s bid; otherwise, Shine Star will be declared the successful bidder. If JC Flowers matches the highest bid, it will be awarded the asset.
Jaypee Healthcare is an Indian-based healthcare service provider. The company started its operation in 2009. It is a wholly-owned subsidiary of Jaypee Infratech and was recently sought in bankruptcy proceedings by the Allahabad Bench of the National Company Law Tribunal. The petition for the same has been passed by Yes Bank. Yes, the bank’s debt has been assigned to JC Flowers. Other loan specialists to Jaypee Healthcare include Union Bank of India, Exim Bank, Punjab National Bank, Bank of Baroda, and Resource Reproduction Company (India). As of March 2024, Union Bank of India’s debt in Jaypee Healthcare stood at Rs 68.56 crore, with the bank setting a reserve price of Rs 61.7 crore. The bank expects to recover over 100% of its debt once it is assigned.
More Accounts in the Auction
The remaining four accounts did not get counter offers amid the Swiss Challenge sell-off, leading to the unique bidders being pronounced successful. Prudent ARC’s Rs 55 crore bid for Shree Saraiwwalaa Agrr Refineries, Maximum ARC’s Rs 27 crore bid for RCM Infrastructure, and CFM Asset Reconstruction’s Rs 16.29 crore bid for GreenWorld International and Ram Chand Baboo Mal & Company were all accepted.
Union Bank’s Broader Efforts
Last month, Union Bank of India welcomed offers for 25 non-performing accounts with an extraordinary amount of around Rs 1,268 crore as of March 31, 2024. Among these, Leo Meridian Infrastructure Projects & Hotels and Shree Saraiwwalaa Agrr Refineries had the highest debt, with a total outstanding of Rs 263.53 crore and Rs 335.91 crore, respectively. The bank fixed a reserve price for each account and held an e-auction on June 27, receiving bids for only five accounts due to the high reserve prices.
Conclusion
The Swiss Challenge auction portrays a sense of proactiveness and demonstrates the determination to manage non-performing assets. Jaypee Healthcare did receive counter bids that were competitive enough to allow the bank to recover its debt; however, lack of interest in other accounts because of high reserve prices poses another stumbling block. As Union Bank forges ahead with efforts aimed at resolving its non-performing assets, the results from such auctions are pivotal determinants of the financial recovery strategy that it will adopt. The triumph of the Swiss Challenge auction for Jaypee Healthcare is indeed a positive prelude; it underscores two vital qualities that every stakeholder ought to be aware of: transparency and commitment to ensuring maximum asset recovery.
