Jaiprakash Associates Acquisition: Why is Vedanta Challenging Adani’s Bid?

Synopsis: Vedanta has challenged NCLT’s approval of Adani Enterprises’ resolution plan for Jaiprakash Associates, arguing that its own bid was higher in value. However, Adani’s offer appears to have been favoured for its larger upfront payment and faster payout timeline, which likely improved lender comfort and recovery visibility.

The Vedanta Group has filed an appeal against the NCLT’s ruling in favour of Adani Enterprises’ bid to acquire the debt-ridden Jaiprakash Associates through the insolvency process. Vedanta’s bid was considered to be higher in terms of the amount offered, but the lenders preferred Adani’s offer of Rs 14,535 crores because of a stronger upfront payment model and a shorter repayment cycle.

Adani’s lower bid won on structure, not size

Vedanta has filed an appeal against the National Company Law Tribunal’s approval of Adani Enterprises’ resolution plan for Jaiprakash Associates, even though Vedanta’s bid to acquire Jaiprakash Associates was higher. The crux of Vedanta’s case against Adani’s bid to acquire Jaiprakash Associates is that Adani’s bid, which was lower in terms of overall amount, won because of the structure of the bid.

Vedanta’s bid to acquire Jaiprakash Associates was estimated at approximately Rs. 16,000 crore, of which an upfront payment of approximately Rs. 3,800 crore will be made, while the rest will be paid over a period of five years. Adani’s bid to acquire Jaiprakash Associates, on the other hand, was estimated at approximately Rs. 14,535 crore, of which more than Rs. 6,000 crore will be paid upfront, while the rest will be paid over a period of two years.

When adjusted for net present value, Vedanta’s bid had been reported to be only slightly higher than Adani’s bid. Even that, it seems, has not been enough for the creditors to be comfortable with the amount. That is what has become the main trigger for Vedanta’s lawsuit, as they may try to contest whether the bidding process placed too much emphasis on the timing of payment rather than on the amount.

NARCL’s dominance played a large role

The other significant factor that has led to the dispute is the composition of the committee of creditors. The defaulted debt of Jaiprakash Associates, amounting to more than 57,000 crore, had been largely transferred to the National Asset Reconstruction Company Ltd by banks. This had given NARCL a controlling 86 per cent of the voting shares of the CoC.

This has resulted in a substantial reduction in the power of the original lenders like SBI and ICICI Bank, whose total voting share is reportedly less than 3%. Vedanta may be protesting not just the outcome, but the very exercise of power in the hands of one entity, particularly in a case where there are several serious bidders and a large stressed asset.

There is a sense in which this case, and others like it, raises questions about the effectiveness of competitive bidding under the Insolvency and Bankruptcy Code in achieving the best possible outcome when one creditor has near-total control. In this kind of scenario, a slight preference in bid design or payment terms may outweigh a higher offer, leaving little room to argue with the business decision.

Recovery concerns are at the centre

The figures at Jaiprakash Associates are a testament to why this case is so important. The total claims admitted are Rs 5.44 lakh crore. Even if we consider bank loans alone to the tune of Rs 57,185 crore, we can see that the recovery under Adani’s plan is not very high. In terms of total claims, we are not even crossing 3%, while in terms of bank loans alone, we are at 25.4%.

For Vedanta, this can be an argument to say that they are right in saying that they should have been considered for a better value proposal. They are perhaps building an argument around value maximisation and whether the proposal that was accepted was in the interest of all parties.

The case also points to the harsh reality in India’s large insolvency resolutions. While lenders might want to focus on speedier and more assured cash flow, the argument that the process should not overlook a larger bid without sufficient reason is one that opposing bidders might raise. The NCLAT’s conclusion in this case would also have significant implications for how Jaiprakash Associates’ insolvency bids are viewed in the future when cash and bid size point in different directions.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post Jaiprakash Associates Acquisition: Why is Vedanta Challenging Adani’s Bid? appeared first on Trade Brains.