Jaiprakash associates bid: Mining sector veteran Vedanta Limited has made a successful bid of debt -ridden Jayaprakash Associates (JAL). The company has proposed to make an initial payment of around ₹ 4,000 crore after the approval of NCLT and pay the remaining amount in the next 5-6 years. The news agency PTI quoted sources as saying that the process may take about a year and the remaining payment will be completed in installments.
Vedanta left behind Adani Group
Vedanta, beating the Adani Group, introduced a Net Present Value (NPV) bid of ₹ 12,505 crore. Jal’s creditor banks got this auction done to find the buyer. Jal’s business includes real estate, cement, power, hotels and road projects.
How Vedanta became a successful bidder
Jal is currently passing through the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC). Resolutions were invited by the resolution professional on 24 June. This was followed by a challenge process between five bidders- Vedanta, Adani, Dalmia, Jindal Power and PNC Infratech. In this, Vedanta became an H1 bidder with a NPV dialect of ₹ 12,505 crore.
Payment structure and funding details
Sources said that the entire payment will be made in installments in 5-6 years. The initial ₹ 4,000 crore will be paid after the approval of NCLT. The remaining amount will be received from Jal’s internal income and Vedanta’s balance sheet. In this way the company will not get additional financial pressure, as Vedanta has sufficient free cash flow.
Waiting for COC approval
Although Vedanta has been declared an H1 bidder, the Creditors Committee (COC) has yet to complete the process and vote on a successful resolution plan. It may take 4-8 weeks. After this, it will take more 3-4 months to implement the plan.
Outstanding ₹ 55,371.21 crore on Jal
According to the stock exchange filing, till August 15, Jal owed ₹ 55,371.21 crore. Under this dialect, Vedanta is offering ₹ 12,505 crore on NPV basis. Since the payment will be in many years, the dialect has been evaluated from the NPV method. This is a capital budgeting technique. In this, the present value of future cash inflow is assessed by comparing the current cost of investment.
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How will Vedanta benefit from this deal
Jal’s five major verticals- Power, Real Estate, Cement, Hotel and EPC are in good coordination with Vedanta’s current business. The company’s power portfolio is already strong, including projects such as Talwandi Sabo and Meenakshi Energy.
Sources say that Vedanta will strengthen his mining and power business using Jal’s limestone and coal mines. Also, when Vedanta’s power business is different, Jal’s power business will make him stronger. Real estate assets are also likely to grow major development through partnership.