Jindal Power exits race to buy JBF Petro; RIL, others in contention

L N Mittal-backed HPCL-Mittal Energy and govt-owned companies remain in contention for the bankrupt firm

Just a week before the deadline to submit financial offers expires, Jindal Power has exited the race to acquire bankrupt JBF Petrochemicals. This paves the way for Mukesh Ambani-owned Reliance Industries (RIL) and L N Mittal-backed HPCL-Mittal Energy and government-owned companies to make an offer for the stressed company by August 8.

The American private equity and KKR-backed petrochemicals company, which has a plant in Mangaluru in Karnataka, had defaulted on bank loans worth Rs 5,000 crore.

The Naveen Jindal-owned firm was among the seven companies which had shown interest in JBF Petrochemicals as on June 9, but lost interest due to changed economic conditions and rising interest rates, said a banker close to the transaction. Jindal Power did not comment on the developments.
 

The other companies who were shortlisted included GAIL (India), Indian Oil Corporation, ONGC, Jindal Poly Films, and MCPI Private.

The petrochemical company had defaulted on bank loans worth Rs 5,800 crore in 2018 and the resolution professional admitted claims of Rs 4,701 crore.

Last week, RIL took over the secured assets of JBF Industries -- the parent company of JBF Petrochemicals-- from CFM Asset Reconstruction Company, which were sold under a separate process as per the SARFAESI Act. The parent firm had defaulted on loans worth Rs 2,500 crore and was sent for bankruptcy to courts in February.

Established in 1982, JBF Industries was founded by Bhagirath Arya as a yarn-texturising company and since then it expanded capacities like polyester chips, partially-oriented yarn and polyester film. The firm later entered overseas markets by setting up a packaging-grade polyester chips plant JBF RAK LLC in the UAE in 2005.
 

In August 2018, JBF Industries had approved a debt-restructuring plan under which KKR agreed to buy out a 100 per cent stake of JBF Petrochemicals.  According to the plan, debt of $464 million (Rs 3,400 crore) in JBF Petrochemicals was not to be consolidated in the accounts of JBF Industries.

Besides an amount of Rs 450 crore was to be returned by JBF Petrochemicals to JBF Industries, in settlement of the inter-corporate deposit provided by JBF Industries.

The funds were to be used for repayment of debt (in part) to banks and balance for working capital. However, Covid-related lockdown dented these plans and both companies were sent for debt resolutions under Sarfaesi Act and IBC 2016.