Jaiprakash Associates to Give 7.71% Stake to ICICI Bank to Clear Outstanding Loan

In a bid to reduce its debt, Jaiprakash Associates Ltd (JAL), the flagship firm of the crisis-hit Jaypee Group, will transfer 7.71% of its stake, equivalent to Rs 366 crore at the current market price, to ICICI Bank. This move is part of a settlement agreement between the two entities.

ICICI Bank's Exposure to JAL

According to sources, ICICI Bank has a significant exposure of around Rs 3,000 crore to JAL, which has diversified business interests in cement, construction, hotels, and real estate. By accepting a stake in JAL, ICICI Bank aims to recover a portion of its outstanding loan.

Transfer of Shares

JAL informed in a regulatory filing that it has entered into a settlement agreement with ICICI Bank and will transfer over 18.93 crore shares to the bank. The value of these shares will be determined based on the closing price at the National Stock Exchange of India on the day prior to the actual transfer.

Reducing Debt Burden

JAL stated that the transfer of shares is aimed at reducing the company's debt burden. The company, along with trusts holding 18,93,16,992 equity shares, has entered into the settlement agreement with ICICI Bank to transfer the shares to the lender.

ICICI Bank's Confirmation

ICICI Bank confirmed that the shares were pledged to the bank and will be transferred as part of the settlement agreement. The bank further stated that these shares constitute 7.71% of the paid-up share capital in JAL. After the settlement, ICICI Bank will reduce its dues from JAL to the extent of the value of shares transferred.

JAL's Loan Defaults

Earlier this month, JAL disclosed that it had defaulted on loans worth Rs 4,258 crore, including principal and interest amounts. The company attributed the default to its obligations to various banks, with the nature of the obligation being fund-based working capital, non-fund-based working capital, term loans, and FCCBs (foreign currency convertible bonds).

Restructuring Efforts

JAL mentioned that it has been taking steps to reduce its borrowings. The company is undergoing a proposed divestment of its cement business and a restructuring process. It expects that the borrowing will be reduced to almost nil upon the implementation of the revised restructuring plan.

Legal Proceedings

ICICI Bank had approached the NCLT Allahabad, under the direction of the RBI, against JAL under Section 7 of the Insolvency and Bankruptcy Code (IBC) 2016. JAL has contested this move, and the matter is pending to be decided simultaneously with the Scheme of Arrangement for the transfer of real estate to the SPV to be sanctioned by the NCLT.

Jaiprakash Associates Ltd.'s transfer of a 7.71% stake to ICICI Bank reflects the company's efforts to reduce its debt burden. This move is part of an ongoing debt resolution exercise, which includes the sale of cement assets and the restructuring of its loan portfolio. While JAL faces legal challenges and loan defaults, the company remains committed to reducing its borrowings and implementing a revised restructuring plan.