Acre ARC sole bidder for Nagarjuna Fertilizers' debt

Mumbai: Ares SSG-backed Acre ARC is the sole bidder for taking over ₹1,500 crore of outstanding loans at the debt-laden Nagarjuna Fertilizers and Chemicals (NFC), people familiar with the matter told ET. Acre has offered to acquire the debt with a cash payment of ₹811 crore, just above the reserve price of ₹810 crore.

This means lenders stand to recover upfront more than half their debt exposure if the deal goes through.

"Tuesday was the last day of the bids and Acre is the only bidder. The ball is now in the court of lenders to take the process forward," said a person familiar with the bid.

Lenders led by IDBI Bank had invited expressions of interest from asset reconstruction companies to take over the debt of NFC after attempts to initiate an insolvency process against the company were stonewalled by the promoter.

Bankers said delays in the court case and dealing with a difficult promoter tilted the scales in favour of selling the loans to an ARC.

Banks received a total of 13 initial bids from prospective buyers but ultimately only one final offer materialised. Banks are likely to invite competitive bids through the so-called Swiss Challenge method to ensure the best value. An IDBI Bank spokesperson did not respond to an email seeking comment.

IDBI Bank, with ₹568 crore of exposure, is the lead lender and is managing the sale on behalf of a seven-bank consortium. Other large lenders include the State Bank of India (₹576.91 crore) and ICICI Bank (₹196.70 crore).

"Acre is paying for this debt because it is a consolidated piece which is available immediately. This means they can look for a strategic investor willing to buy this debt at a premium because it gives them a readymade plant with all linkages in place," said a second person aware of the deal.

The 1.59 million tonne plant in Kakinada had faced issues due to a gas pipeline burst in 2014-15. Fertiliser is a heavily regulated sector with significant dependence on government subsidies: Delays in such payments also impacted the business.

"The group also spread itself too thin and went into different businesses. All these factors resulted in the company slipping into an NPA. But now things are looking up for the sector and margins are improving, so Acre can expect to sell it to a strategic investor once it consolidates the debt," said a third person aware of the business.