For the four-laning of a road project in Maharashtra, a consortium of lenders led by the Union Bank of India (UBI) has asked for bids to replace Supreme Manor Bhiwandi Infrastructure (SMBI), the current concessionaire. Opting for the Swiss Challenge method, UBI has directed Edelweiss Finance and Investment to play the role of process advisor.
The two entities share a history as SMBI has defaulted on loans worth Rs 164 crore to UBI. On August 11, SMBI was given a Joint Lender’s Forum (JLF) restructuring package by an order from the National Company Law Tribunal. Despite this, discrepancies were detected in the package payment process within SMBI due to its deteriorating books and finances.
Due to this, on November 24, 2016, SMBI invoked Strategic Debt Restructuring (SDR). As per the JLF, SMBI could invoke pledged shares for management change outside SDR and hence, SMBI utilized the clause on 51% shares.
In 2018, Kalyan Toll Infrastructure (KTIL) ownership bid, for management change, was accepted. But, in May 2018, process advisors overlooking the bid informed members of JLF that the KTIL bid received an RP5 credit opinion. According to RBI, a change in ownership bid with a credit rating equivalent to RP4 or higher is not applicable for consideration.
Taking cognizance of the matter, UBI issued multiple notices throughout 2018 to SMBI for the loan payment of Rs 160.8 crore. SMBI failed to comply in time and hence, UBI classified the debtor as “NPA (non-performing asset) as per RBI norms”.
Apart from replacing SMBI in the Maharashtra Road Project, UBI has filed an insolvency petition against SMBI. In its defense, SMBI claimed that the decision to discard its bid in reference to the RP4 credit opinion was taken without adequate legal authority and outside the provisions of Banking Regulation Act. Therefore, the bid rejection stands null and void.
Currently, SMBI continues to struggle against the legal and financial pressure.