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Tata-backed Resurgent Power makes better offer for Prayagraj Power

New Delhi: Resurgent Power Ventures, a company backed by the Tata Group and ICICI Ventures, has submitted what may be a better offer for Prayagraj Power Generation Company than JSW Energy’s bid, even though they both appear to be the same at about Rs 6,000 crore.

JSW Energy’s offer is laced with conditions that make it less attractive, said two senior bank officials who did not want to be identified.

While Resurgent Power’s bid involves upfront cash of Rs 6,000 crore to acquire Prayagraj Power and equity for the lenders, JSW Energy’s offer works out to about Rs 3,800 crore with equity.

The bank officials told ET that JSW Energy has set a condition that all tax liabilities arising from the transaction would have to be deducted from its offer of Rs 5,940 crore.

Following JSW Energy’s offer, the lenders appointed consulting firm PricewaterhouseCoopers to assess the tax liabilities of Prayagraj Power. PwC indicated the tax liability could be as high as Rs 2,200 crore, making JSW Energy’s offer effectively Rs 3,740 crore.

Resurgent Power is a fund with focus on power projects. JSW Energy operates 4,543 MW of thermal, hydel and solar power generation capacity in India and seeks to achieve 10,000 MW by 2020, according to the company website. The company is controlled by billionaire Sajjan Jindal.

Originally, Resurgent Power had submitted an expression of interest for Prayagraj Power, without a binding bid. Soon after JSW Energy emerged as the highest bidder, Resurgent countered with an offer of Rs 6,000 crore in upfront cash.

The Tata Group and JSW Energy are also in the race to acquire Bhushan Power & Steel, where JSW Steel improved its offer by 60% after lenders declared the Tatas as the highest bidder.

Probably in reference to the battle for Bhushan Power, Resurgent is pitching its offer on the grounds that there have been instances under the Insolvency and Bankruptcy Code where lenders have accepted a revised bid even after an entity was declared the highest bidder. Since the resolution of Prayagraj Power is in line with the IBC model, it is binding on the lenders to consider Resurgent’s offer, they have conveyed to the lenders.

Lenders keen on maximising their recovery are in favour of accepting Resurgent’s offer, the bank officials said. Taking up the Resurgent offer means the lenders will have to forgo less than 50% of the Rs 11,000 crore borrowed by Prayagraj from a group of 17 entities led by State Bank of India. The amount foregone would be 66% in case of JSW Energy.

The lenders currently hold an over 89% stake in Prayagraj Power, which operates a 1,980 MW thermal power plant near Allahabad in Uttar Pradesh. The remainder stake is held by Jaiprakash Associates, the original promoter of the company.

The lenders are racing to find a resolution for the stressed asset by the end of this month to prevent it from being referred to the bankruptcy courts.

They acquired a majority stake in the company on converting their debt into equity under a strategic debt restructuring scheme. Under the scheme, the lenders have to find a buyer for their stake in 18 months. However, even after repeated attempts over the past two years, the lenders were unable clinch a deal