Reliance Power offers Rs 1,200 cr cash settlement to VIPL Lenders

Reliance Power, a subsidiary of Reliance Infrastructure, has put forward a lucrative proposal to settle the debt of its subsidiary, Vidarbha Industries Power Ltd (VIPL). The company has offered a one-time settlement (OTS) amounting to Rs 1,200 crore to the lenders of VIPL, which include prominent financial institutions like Axis Bank, SBI, Bank of Baroda, PNB, Canara Bank, and Bank of Maharashtra.

As of March 31, 2022, VIPL carries an outstanding loan of approximately Rs 2,200 crore. Reliance Power's OTS offer stands out due to its commitment to pay the entire amount in upfront cash. To solidify this proposal, Reliance Power has secured the support of Varde Partners, an investor based in Singapore, which has vested interests in another company within the Reliance group, Reliance Infrastructure Ltd.

VIPL operates a coal-based power project in Nagpur with a substantial capacity of 600 MW. Previously, CFM Asset Reconstruction Pvt Ltd, headquartered in Ahmedabad, made an all-cash offer of Rs 1,120 crore to VIPL's lenders. However, CFM ARC is now under scrutiny by the Reserve Bank of India (RBI) and the Income Tax Department for alleged malpractices and business misconduct.

Following CFM ARC's offer, National Asset Reconstruction Company Ltd (NARCL) stepped in and proposed an amount of Rs 1,150 crore to VIPL's lenders. However, NARCL's offer includes only 15 percent payable in upfront cash, while the remaining sum will be disbursed through interest-free installments over the course of five years. The net present value of NARCL's offer is estimated to be merely Rs 850 crore.

In contrast, Reliance Power's OTS offer of Rs 1,200 crore in full cash payment presents a significantly higher and more attractive alternative for the lenders of VIPL. This offer ensures a prompt resolution to the debt issue and provides the lenders with a favourable outcome.