LIC puts Rs 613-crore KSK Mahanadi debt on the block

Mumbai: The Life Insurance Corporation (LIC) of India has finally entered the bad-loan market.

The state-owned insurance company has invited bids for its ₹613-crore debt exposure to KSK Mahanadi Power after it received an anchor offer from Rare ARC, two people aware of the development told ET.

An offer of ₹188 crore from the Ahmedabad-based ARC has triggered a Swiss challenge auction, and on Wednesday, LIC invited counter offers from other ARCs, the people said. Rare ARC, being an anchor bidder, will have the first right to match the counteroffer.

In the two years, LIC has explored the possibility of selling some of its distressed loans three times to ARCs but has called off the exercises without explanation to the bidders.

However, this time, a deal is about to be closed, said people cited above. "A Swiss auction implies that the seller has agreed to sell the loans to the anchor bidder and is only exploring the possibility of getting a better offer," said an official from an ARC.

Rare ARC and LIC did not respond to ET's request for comments.

On Wednesday (November 2), IDBI Capital Markets & Securities (IDBI Caps), on behalf of its client - an insurance company - invited counteroffers from ARC for a Swiss auction triggered for the debt KSK Mahanadi Power. IDBI Caps did not mention the name of the client and the anchor offer.

IDBI Caps stated that interested applicants can submit expressions of interest by November 7. In July 2021, LIC invited offers to sell 16 distressed loans amounting to ₹8,091 crore. However, after receiving firm bids, it did not proceed with selling the accounts.

This year too, LIC invited offers for the sale of its ₹3,400 crore debt to Reliance Capital twice but did not go ahead with the sale, as reported by ET on August 22.

Mid-August, the State Bank of India sold its ₹5,058 crore admitted claims of KSK Mahanadi Power to Aditya Birla ARC for ₹1,622 crore in an all-cash deal. It is the single largest distressed loan sale on an all-cash basis between a bank and an ARC.

KSK Mahanadi has been undergoing insolvency proceedings since October 2019, but the sale process has been delayed due to a series of litigations.

Several other lenders, such as Axis Bank, Bank of Baroda and Punjab National Bank have sold their debt to ARC over the last two years.