July 31, 2020

SBI Lends Rs. 1,200 Crore to Patanjali to acquire beleaguered Ruchi Soya, Despite Zero recovery and Rs. 746 Crore Write Off

[ by Legal Era News Network ]


State Bank of India (SBI) has approved a fresh loan of Rs. 1,200 crore to Baba Ramdev-led Patanjali Ayurved to help it acquire the beleaguered Ruchi Soya Industries.

This has unveiled strange banking practices which suggest a callous disregard for recovering bad debts. SBI, had in FY 2019-20, written off Rs. 746 crore of non-performing assets (NPA) of Ruchi Soya Industries. The plan approved under the Insolvency & Bankruptcy Code (IBC) had indicated that SBI would recover Rs. 883 crore against its admitted claim of Rs. 1,816 crore.

SBI was part of a consortium of banks that lent Rs. 3,200 crore to Patanjali Ayurved for its acquisition.  Several banks led by SBI had made claims to the tune of over Rs. 12,146 crore against Ruchi Soya before the bankruptcy courts. SBI had the highest exposure of Rs. 1,800 crore, followed by Central Bank of India (Rs. 816 crore), PNB (Rs. 743 crore), Standard Chartered Bank India (Rs. 608 crore) and DBS (Rs. 243 crore).

Many private banks insist on converting loan to equity in such situations and gain from capital appreciation. In the case of Ruchi Soya, the share price has moved from about Rs. 3.50 to Rs. 1,535 a gain of 43,757.14% since Patanjali acquired the company. 

In a regulatory filing in September 2019, Ruchi Soya had said that the National Company Law Tribunal (NCLT) has approved Patanjali’s resolution plan of Rs. 4,350 crore. The order had stated that, Patanjali would “infuse the amount of Rs. 4,350 crore” in a SPV (special purpose vehicle) called Patanjali Consortium Adhigrah, which will be later amalgamated with Ruchi Soya.

In an exchange filing, Ruchi Soya said that the Patanjali group would infuse Rs. 204.75 crore as equity and Rs. 3,233.36 crore as debt. Another Rs. 900 crore will be brought through the subscription to non-convertible debentures and preference shares in the SPV. It would also provide a credit guarantee of nearly Rs. 11.89 crore.

When an application was filed under Right to Information (RTI) Act, the Reserve Bank of India (RBI) had told the applicant that Ruchi Soya Industries with a debt of Rs. 2,212 is one of the top 50 defaulters.

Apparently, Patanjali Ayurved was supposed to have paid back Rs. 4,053.19 crore to the creditors under the resolution plan. So, either Patanjali Ayurved has repaid part money to creditors or renewed old loans of Ruchi Soya in its account books.

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