Adani Power Reconsiders Buying Lanco Unit, Makes Improved Offer

In a surprising reversal from their decision to withdraw from the competition in December, Adani Power has now reaffirmed their interest in acquiring the financially distressed Lanco Amarkantak Power company. 

According to media reports, the company has recently presented an increased bid of Rs 3,650 crore to the lenders, surpassing their prior offer of Rs 2,950 crore made in December.

On 2 November, the thermal power company's lenders would be gathering to evaluate Adani's latest proposal. Prior to this, most lenders had supported a resolution plan of Rs 3,020 crore that was put out by a group headed by PFC.

Adani Power garnered only 17 per cent of the votes in January, compared to 95 per cent for the proposal put forth by the PFC-led consortium. No votes were cast for Reliance Industries, a rival company that offered Rs 2,103 crore.

With over 66 per cent of the votes, the PFC consortium was able to acquire a bankruptcy-affected company and win. Adani and Reliance refrained from participating in a challenge auction because of their apprehensions regarding the sale procedure and the involvement of the PFC-REC.

The PFC-REC plan has not yet been approved by the National Company Law Tribunal (NCLT), and lenders can request withdrawal of the approved plan, but this requires the agreement of PFC and REC, who collectively hold 41 per cent of Lanco Amarkantak's debt.

The PFC-REC team, being both a bidder and a lender to the company, can block any proposal as per the Insolvency and Bankruptcy Code (IBC). In this case, they can do so because they are the largest debtholder. 

The IBC states that anyone with more than 34 per cent debt can block a resolution, while it can be approved with the support of 66 per cent of lenders.

When lenders favored the PFC-REC offer in December 2022, the company had Rs 1,200 crore in cash from its operations, which has now increased to Rs 1,800 crore. Adani's higher offer may lead lenders to reconsider their decision.

The government-owned PFC consortium has received approval from the Competition Commission of India for the deal. Lanco has commissioned the first phase of its power projects, providing electricity to several states. A resolution professional has accepted claims of Rs 14,632 crore from 17 lenders.