The insolvency resolution of Jaiprakash Associates Limited (JAL) hinges significantly on the involvement of State Bank of India (SBI), ICICI Bank, and IDBI Bank. With admitted claims exceeding Rs 51,000 crore, this case represents one of the largest insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) since its inception in 2016.
As of late July, financial creditors, including homebuyers, have claimed a total of Rs 51,510 crore from JAL. SBI stands out as the largest creditor, holding approximately Rs 15,500 crore, which constitutes 30% of the total debt. ICICI Bank follows with an 18% share, while IDBI Bank holds 11%. Collectively, these three banks account for nearly 60% of the outstanding debt. Including LIC’s 6% stake brings the total to 66%, the majority vote required to sanction a resolution plan.
Banking sources suggest that the consolidation of debt among these primary creditors could streamline decision-making processes, potentially accelerating the resolution of a case that has faced a six-year delay before being admitted to insolvency. A source close to the resolution process commented, “The admission of this case to insolvency is a significant relief. Although the resolution is complex and still in its early stages, the involvement of three major creditors holding substantial portions of the debt is likely to consolidate support from other lenders.”
Jaiprakash Associates was among the 26 defaulters identified by the Reserve Bank of India (RBI) for insolvency proceedings in 2017. ICICI Bank initiated the insolvency petition in 2018, which was finally admitted in June this year, offering renewed hope for creditors. The company’s asset portfolio includes operational cement plants with a combined capacity of over 9 million tonnes, extensive real estate holdings around the Yamuna Expressway Industrial Development Area (YEIDA), hotels in major cities, power plants, a hospital, and the Buddh International Circuit, India’s sole Formula One track.
While lenders are optimistic about the value of these assets, they remain cautious due to anticipated litigation from the promoters, disputes with state agencies like YEIDA, and multiple encumbrances on the assets. An insider noted, “Initial interest in the assets is promising, with formal expressions of interest expected shortly. However, potential legal challenges and the need to resolve agreements with agencies like YEIDA could complicate matters. An enterprise valuation is pending, and the resolution professional’s appointment still requires ratification by the committee of creditors. Despite these hurdles, preliminary interest from large corporate groups suggests there may be value to be realised for the creditors.”
Lenders are also preparing for potential litigation from JAL’s promoters, who have previously impeded the process over the past seven years. Recently, JAL sought a stay on the insolvency proceedings from the appellate tribunal, but the court has postponed intervention pending creditor input. This case underscores the critical role of major creditors in navigating the insolvency resolution process, highlighting both the opportunities and challenges in resolving one of the largest corporate defaults under the IBC.
