RIL inches closer to acquiring Lanco Amarkantak with Rs 1,960 cr cash offer

If the deal goes through, it will be the third big-ticket acquisition by the Ambani firm under IBC

Mukesh Ambani-owned Reliance Industries (RIL) is leading the race to acquire Lanco Amarkantak Power (Lanco), a coal-based power project, with an offer of Rs 1,960 crore cash upfront. If the offer is accepted by lenders, this will be the third big-ticket acquisition by RIL under the Insolvency and Bankruptcy Code, 2016, after buying the tower assets of Reliance Infratel – a subsidiary of Reliance Communications - and textile company Alok Industries (Alok).

RIL, which already operates a 360-megawatt (Mw) coal-based power plant in Gujarat’s Hazira, has withheld from investing in new coal-based projects to focus on renewable energy.
 

Lanco was initially planning to set up a thermal power plant with an aggregate capacity of 3,240 Mw on a 1,337-acre land parcel in Chhattisgarh’s Korba. Phase 1 of the project is already operational.

Axis Bank had moved the National Company Law Tribunal against Lanco in June 2018, after it started defaulting on its loans. Claims worth Rs 14,604 crore were admitted by banks with the Power Finance Corporation (PFC) making the biggest claim of Rs 3,182 crore. REC (formerly Rural Electrification Corporation), a government-owned firm, made a claim of Rs 3,000 crore.

In March 2020, a Reliance Jio arm made the highest offer to acquire Reliance Infratel after the Anil Ambani-owned company defaulted on its loans amounting to Rs 13,483 crore. In 2018, RIL and JM Financial Asset Reconstruction Company acquired Alok for Rs 5,000 crore. RIL later pumped additional funds into Alok.

RIL did not comment on the Lanco acquisition.

Apart from RIL, Adani Group has also made an offer of Rs 1,800 crore to lenders. PFC and REC – which have the highest exposure to Lanco – have also made an offer with 40 per cent equity to lenders and Rs 3,400 crore to be paid over 20 years.

The committee of creditors may ask the top two parties to make a better offer and then take a final call, said a banker close to the development.

RIL’s interest in coal-based power generation has surprised analysts, given that the firm is investing Rs 75,000 crore in renewable energy with a commitment to double it, depending on available opportunities.
 

Coal-based power generation is considered environmentally unfriendly. Due to peak power demand, especially after sundown, analysts say renewable energy alone will not suffice and coal-based power projects become necessary.