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A consortium of nine banks is set to opt for strategic debt restructure (SDR) mechanism of the much-delayed 500 MW Teesta hydel power project under execution of Lanco Infratech Ltd.
This SDR will enable the banks to gain control of the project, help the infrastructure company execute the project and later pave way for stake divestment, to either the Sikkim Government or any other developer interested in the asset.
The Rs 3000-crore project, taken up by the cash-strapped Lanco Infratech Ltd, with a debt equity of Rs 2,400 crore: Rs 600 crore (80:20 debt-equity), had run into number of issues, including a major earthquake in Sikkim, forcing the company to get back to the drawing board, according to T Adi Babu, Chief Operating Officer of Lanco Infratech.
The SDR mode is a new approach RBI has allowed for bankers to address financially stretched assets. This enables them to rejig debt and acquire stake. In this case, they may take up to 51 per cent. The bankers include ICICI, IFCL, PNB, REC, Hudco among others.
“If the SDR is concluded, we would get enough funds and time to execute the project,” he told Business Line.
“Due to tough business cycle, we had approached the lenders to recast the loan and then enable us to execute the project. And as things get better, the stake divestment could take place. The Sikkim Government too has the first right to acquire stake. Or if it does not want to, then other strategic investor could become part of the project,” he said.
Given the macro economic conditions and low investor appetite for power sector, the stake sale initiative of the company has not progressed. As the conditions improve, Lanco would go in for stake sale. The company had last year divested Lanco Udipi and Budhil hydel projects to Adani Group entity and Greenko respectively.
While the Lanco has a total debt of Rs 36,000 crore, it concluded a corporate debt restructure for Rs 9,500 crore.
Its effort to divest stake and bring down debt has become tough due to current market conditions not being favourable to power sector companies.
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