JSW Energy Wins KSK Mahanadi Bid
In a keenly competitive e-auction, Sajjan Jindal's JSW Energy came in as the highest bidder of KSK Mahanadi Power. Sources said, JSW outbid Adani Power in the last round by offering Rs 15,985 crore while surpassing Adani's last bid by just Rs 100 crore. This deal further increases JSW Energy's increasing foothold in India's power sector as it will gain control of KSK's assets in Chhattisgarh, which include three operating coal-based units of 600 MW each.
Six major firms had bid aggressively in the auction that was concluded on Saturday. Major contenders included Adani Power, Jindal Power, Vedanta, and NTPC Ltd. Adani Power, who was one of the big contenders, backed out after a Rs 15,885 crore offer in the 10th round of bidding. This allowed JSW to stay as the sole serious contender in the 11th round. In addition to the monetary offer, JSW also provided the lenders with a 26% equity stake, similar to what Adani was offering.
Capri Global was one of the other major players who pulled out after putting in their Rs 15,850 crore bid in the 10th round.
The e-auction process was conducted by RP Sumit Binani along with PwC. It allowed claims from financial creditors amounting to Rs 29,330 crore. Under the winning offer from JSW, lenders will get a front-end recovery of almost Rs 26,485 crore, which would reflect about 90% of claims considering that JSW brings Rs 15,985 crore on board besides bringing in Rs 10,500 crore in cash as well as undisputed fund receivables. Added to this is the factor of the proposed 26% equity stake that recovery will be well over 100%, one lender claimed.
This is JSW Energy's third big-ticket deal in the power space in two years. In December 2022, it had bought Ind Barath Energy (Utkal) for Rs 1,048 crore, while in March 2023, its subsidiary JSW Neo Energy acquired a renewable energy portfolio of 1,753 MW from Mytrah Energy for an enterprise value of about Rs 10,150 crore. The acquisition of KSK Mahanadi Power has further strengthened the energy portfolio of JSW, wherein the company continues to broaden its coal-based and renewable energy assets.
For the last six years, the company had been keen to acquire KSK Mahanadi, which it first valued at Rs 10,300 crore in 2018. However, due to a downward revision by the Uttar Pradesh government for the tariffs, Adani Power backed out of its proposal in early 2019. In this regard, however, Adani has still been pretty active in the insolvency landscape of the power sector, purchasing under IBC Avantha Power's Korba West Power, Coastal Energen and Lanco Amarkantak Power. Adani's current interest is supported by a preliminary bid that included a massive upfront payment of Rs 12,500 crore and cash of Rs 10,400 crore in the company, aggregating an offer value of Rs 27,000 crore in the first round of the auction.
RP has fixed a reserve price of Rs 12,500 crore, supported by Adani's high offer at the initial stage. However, after multiple rounds and with the amount rising, Adani, Capri Global, and most of the other major participants dropped out before JSW emerged as the highest bidder. A final resolution structure should now come from JSW and other bidders which will then be voted upon by lenders on the proposal itself. The resolution can still face a fight in this regard, as ARCs play an important role in the claim structure.
The insolvency proceedings that began in 2019 were delayed due to litigation and changing market conditions. Aggrieved by the protracted proceedings, several lenders, whose verified claims totaled Rs 16,165 crore, sold their debts to ARCs. Today, six ARCs own 54.4% of KSK Mahanadi's validated claims. Here, the critical stake lies with Aditya Birla ARC, after acquiring debt from Axis Bank, SBI, and others. As per IBC, 34% will suffice for the blockage of resolution in case of disagreement between stakeholders, which will be yet another complexity if disagreement emerges.
Shardul Amarchand Mangaldas advises the RP and Cyril Amarchand Mangaldas advises the committee of creditors. Both firms played a crucial role in negotiating the intricacies involved in the high-stakes bidding process and compliance with regulatory requirements.
