NEW DELHI: Adani Group has used the Insolvency and Bankruptcy Code (IBC) to good use to acquire stressed assets and consolidate its position in sectors like power and ports -- two key areas of operations for the group.
Adanis have made three big-ticket acquisitions -- where the realisation for lenders have been more than Rs 1,000 crore -- through the corporate insolvency resolution process. The group has also acquired a few firms where the realisation was below Rs 1,000 crore.
Earlier this week, Adani Ports and Special Economic Zone Ltd (APSEZ) said that it completed the acquisition of Karaikal Port Private Limited (KPPL). This was the first big acquisition by the billionaire Gautam Adani-promoted group after the Hindenburg Research report published on January 24, 2023.
Before KPPL, Adani Power was the successful resolution applicant (SRA) of two other big firms – Essar Power MP (EPMPL) and Korba West Power Company. Adani Group, in all three big IBC proceedings, paid only a fraction of the amount claimed or admitted by the creditors.
As per the resolution plan, Adani Ports paid Rs 1,583 crore for the Karaikal Port of which Rs 1,485 crore will be infused as an upfront payment to financial creditors. The admitted claims for KPPL were Rs 2,997 crore. In the acquisition of Korba West Power plant, Adanis paid R1,100 crore to financial creditors, who had together admitted claims of Rs 3,346 crore. The unsecured lenders, for the first time, were provided 100% of their Rs 1,685 crore claim under the approved plan. Incidentally, Adani was one of the unsecured creditors of KWPCL.
In case of Essar Power, the approved resolution plan provides for payment of Rs 2,500 crore as against the admitted claim of financial and operational creditors to the tune of Rs 12,000 crore. The amount claimed in this case was much higher at over Rs 20,000 crore.
In the case of smaller firms acquired by Adani, financial creditors took a haircut of up to 98%. The Mumbai Bench of NCLT in January 2023 approved the Rs 32-crore bid by Adani Goodhomes for real estate company Radius Estates and Developers. Radius Estates and Developers owed Rs 1,892 crore to financial creditors.
This implies a 98.4% haircut in the CIRP. Adani Ports also acquired Dighi Port for Rs 705 crore in February 2021. Adani Properties Pvt Ltd (APPL) in February 2020 also became the new owner of a palatial bungalow for Rs 400 crore on New Delhi’s Bhagwan Das Road -- a prize the company won as a part of the bankruptcy proceedings of Aditya Estates. The value of this property was pegged at about Rs 1,000 crore. Since the provisions of Corporate Insolvency Resolution Process (CIRP) came into force on December 1, 2016, a total of 6,199 CIRPs have started, as of the end of December 2022.
As of December 2022, 611 CIRPs have resulted in resolution, where the creditors have recovered 30.40% of their admitted claims, according to the government figure. While the IBC was intended to tackle the bad loan problems that were affecting the banking system, it became a useful tool for cash-loaded firms to grab troubled companies at prices much lower than their peak values.