CFM ARC leads race for Gammon India's ₹514-cr debt

Mumbai: CFM ARC has emerged as the anchor bidder to takeover the ₹514 crore debt of engineering, procurement and construction (EPC) company Gammon India Ltd from state-owned Punjab National Bank (PNB).

Documents accessed by ET show that PNB has called for a challenging bid to the ₹140 crore all cash offer it received from CFM ARC for its ₹514 crore loans in the EPC company. "The bank has initiated a Swiss auction to find a better price on an all cash basis. Bidding is likely via an electronic auction next week. From CFM's perspective, it will help the company to consolidate Gammon's debt," said a person aware of the details. CFM's offer at ₹140 crore means about a 73% haircut for PNB on the company's total exposure of ₹514 crore to the bank.

Gammon's total debt stands at about ₹3,800 crore. It has been a legacy NPA account in bank's books for more than a decade. However, recovery from EPC companies is difficult as these companies have little real assets to show and are mostly entangled with litigations with regards to government payments.


"In this case, CFM is looking to consolidate Gammon's debt with an eye on some real estate assets and also to benefit from setting off some taxes on losses accumulated by the company," said a second person familiar with the details.

An email sent to CFM ARC did not receive a response till press time. Interested bidders challenging CFM's offer will need to submit bids at a mark up of 5% in an electronic auction with subsequent bids at a multiple of ₹7 crore. The auction is slated for Wednesday. CFM will get a chance to meet or beat the highest bidder according to Swiss auction norms.

CFM has already taken over about ₹684 crore loans of Gammon consisting 18% of the total from IDBI Bank a couple of months ago. If successful in the PNB auction, CFM will have about a 32% of share of the company's debt, giving it an upper hand in any planned resolution.