SBI sells Rs 3,815 crore KSK Mahanadi loan to Aditya Birla ARC

Mumbai: State Bank of India is set to sell its ₹3,815 crore outstanding loan from KSK Mahanadi Power to Aditya Birla Asset Reconstruction Company, which will help the bank shore up its earnings for the June quarter, said two people aware of the plan.

The bank declared Aditya Birla ARC's bid of ₹1,544 crore as the highest at an auction held on Monday, they said.

This will be the single biggest distressed loan sale on an upfront payment basis by any bank, equating to a recovery of 40%. So far, most big-ticket distressed loan sales were structured deals involving part payment in the form of security receipts that would be redeemed upon recovery from defaulting borrowers.


Aditya Birla ARC's bid was supported by its joint venture partner, Varde Partners, the people said.

"The bank has fully provided for this loan, which will reflect in the recovery and earnings numbers," said a bank official who did not want to be named.

SBI and Aditya Birla ARC did not respond to ET's request for comment.

SBI's move to exit the power company comes when the government has asked lenders to support distressed power producers to improve production.

Upon acquiring SBI loans, Aditya Birla ARC would gain control over 34% of KSK Mahanadi Power's loans, a critical level needed under the Insolvency and Bankruptcy Code (IBC). A resolution would not get approved if 34% of lenders voted against it.

The ARC's 34% share of loans would include 18% it would gain upon acquiring SBI loans and 16% it already has on its books after buying loans from Axis Bank, Bank of Baroda, and Punjab National Bank in the last two years.

"The timing of SBI's proposed loan sale of KSK Mahanadi indicates that lenders are no longer confident of timely resolution under the IBC-driven process," said a lender.

KSK Mahanadi Power has been undergoing insolvency proceedings for over two and a half years. The resolution professional, Sumit Binani, backed by PricewaterhouseCoopers, has extended the deadline to submit a firm bid for the company to July 8 from April 29. The RP has received ₹29,501 crore of claims from financial creditors.