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JSW Energy emerges top bidder for KSK Mahanadi Power

JSW Energy emerged as the top bidder for KSK Mahanadi Power, offering Rs 15,985 crore and surpassing Adani Power’s Rs 15,885 crore bid. The auction saw six companies participate with JSW Energy securing the deal. The resolution requires further approval from lenders.

26% equity stake to lenders is also part of proposal. Lenders’ cash recovery will be over 90%.

Mumbai: Sajjan Jindal-promoted JSW Energy emerged as the top bidder for KSK Mahanadi Power, offering Rs 15,985 crore to financial creditors and outbidding Adani Power at an auction that ended on Saturday, said people with knowledge of the matter.

Six companies participated in a two-day intense bidding process. Adani Power opted out of the race after making a final offer of Rs 15,885 crore in the 10th round, people cited above said. JSW Energy, the sole bidder in the 11th round, topped Adani’s bid by Rs 100 crore. JSW and Adani offered 26% equity stake to lenders and another Rs 100 crore to operational creditors.

Financial services firm Capri Global, was also in the fray but exited after making a final offer of Rs 15,850 crore in the 10th round, while Naveen Jindal promoted Jindal Power, Anil Agarwal’s Vedanta and government-owned power company NTPC Ltd were active bidders until the 9th round of the bidding process, people cited above said.

PwC supported the resolution professional (RP), Sumit Binani.

The RP has admitted Rs 29,330 crore claims from financial creditors. For lenders, the upfront recovery will be about Rs 26,485 crore or 90% (including JSW’s offer of Rs 15,985 crore and Rs 10,500 crore as cash and undisputed fund receivables). However, if a 26% equity stake is factored, the recovery will be over 100%, a lender said. In August, NCLT allowed the RP to distribute Rs 6,400 crore cash (out of Rs 10,500 crore) in the company.

For JSW Energy, this is the third prominent acquisition in the power sector. In December 2022, it acquired 700 MW Ind Barath Energy (Utkal) for an enterprise value of Rs 1,048 crore and in March 2023, its subsidiary JSW Neo Energy acquired a 1,753-MW renewable energy portfolio from Mytrah Energy at an enterprise value of approximately Rs 10,150 crore. KSK Mahanadi Power has three operational coal-based units of 600 MW each in Chhattisgarh.

Adani had been eyeing KSK Mahanadi Power, promoted by Kishore Sethuraman, for over six years. In late 2018, Adani offered Rs 10,300 crore, but it backed out in February 2019 after the Uttar Pradesh government revised tariffs downward. Under the Insolvency and Bankruptcy Code, it has acquired at least three power companies — Avantha Power’s Korba West Power, Coastal Energen and Lanco Amarkantak Power.

JSW Energy and other bidders who participated in the auction process will have to submit a final resolution detailing the structure of payment. The RP will thereafter invite lenders to vote on the resolution plans. For the auction, RP set a reserve price of Rs 12,500 crore, which was anchored on Adani Power’s higher upfront payment offer made in the first round of the bidding process. In that round, Adani had given an all-inclusive offer of Rs 27,000 crore comprising Rs 12,500 crore upfront payment, Rs 10,400 crore cash in the company, Rs 2,000 crore undisputed receivables and Rs 2,000 crore disputed receivables.

The debt resolution of KSK Mahanadi, which was admitted into the National Company Law Tribunal in 2019, is delayed due to a series of litigations. Losing patience, a dozen lenders with Rs 16,165 crore of verified claims among them, separately sold their debts to various asset reconstruction companies (ARC).

As many as six ARCs jointly control 54.4% of verified claims after acquiring loans from multiple banks. Aditya Birla ARC, a 50:50 joint venture between Aditya Birla Capital and Varde Partners, was an early entrant in acquiring debt from lenders such as Axis Bank and SBI. It now holds a critical 34% stake in the thermal power company. Under India’s insolvency process, no resolution can pass until 66% of lenders approve it; effectively, a debt holder with little over 34% can block a resolution.

Shardul Amarchand Mangaldas advised the resolution professional, while Cyril Amarchand Mangaldas advised the committee of creditors.