Imagicaa creditors may now take the ARC route to sell company

Mumbai: Creditors to Imagicaaworld Entertainment, promoted by noted Bollywood producer Manmohan Shetty, are rejigging the sale process of the debt-laden company to reduce regulatory clearances and possible legal hurdles.

As part of the rejig, creditors have decided to order a rebid, most likely involving an asset reconstruction company (ARC), which will purchase the debt from banks and find a buyer for the company. Bankers say involving an ARC and selling the loan portfolio will be easier and quicker as it will not require regulatory and court permissions.

"Creditors have decided that getting an ARC in the middle will be quicker as banks will not have to seek regulatory approvals or launch an open offer. It also reduces chances of any litigation by Shetty in the future," said a person aware of the discussions.

Imagicaa owes lenders a minimum of ₹1,020 crore and has so far received a single binding bid from Malpani Group, which has submitted a ₹5-crore bank guarantee in line with the requirements specified in the bidding document. The group has bid over ₹500 crore that includes equity stake for lenders in Imagicaa that can be encashed later.

"Lenders are not comfortable taking the equity stake. So the best solution is for the debt to be transferred to an ARC, which will then work out the modalities with Malpani or if another bidder comes along. This way banks will be able to recover on a cash basis in a shorter time frame," said a second person aware of the discussions.

Lenders are likely to advertise for bids for a portfolio sale next month. A couple of ARCs have already expressed interest in joining the process.

"We plan to have at least two rounds of bidding to ensure we have a strong price discovery. Malpani is very keen but who knows we may get a higher bid. We plan to close this transaction in the fourth quarter," said a third person involved in the discussions.

Imagicaa owns multiple theme parks around Mumbai and Pune and is promoted by Shetty, who owns 31% directly and indirectly.

Shetty is a noted Bollywood producer. He sold his film business to Anil Ambani's Reliance MediaWorks in 2005 and branched out to a new business of building theme parks.

Imagicaa has been facing financial pressures due to rising costs in the last couple of years. These pressures have been compounded due to the Covid pandemic, which shut down theme parks across the world.

Half year results released at the end of October showed that the company's consolidated losses had widened to ₹154 crore in the first six months of the current fiscal from ₹147 crore a year ago as finance and impairment costs remained high despite a pickup in revenues.

In the accompanying notes, the auditors V Sankar Aiyar & Co said the networth of the company has been eroded.

"The holding company has been unable to conclude renegotiations or obtain replacement financing due to recalling of debts by the financing lenders... there are arrears of statutory dues of provident fund and TDS, etc. These situations indicate that a material uncertainty exists that may cast a significant doubt on the group's ability to continue as a going concern," the auditors said.

Imagicaa shares ended 4.88% down at ₹11.50 a piece on the BSE on Thursday.