Sadbhav Engineering lenders have chosen an out-of-court debt restructuring. This decision bypasses an offer from NARCL. A consortium-led plan was approved by lenders. The company finalized a ₹1,517 crore restructuring package. This move aims to resolve stressed assets outside insolvency courts. The agreement involves convertible debentures and equity conversion. Lenders include PNB, Union Bank of India, and Axis Bank.

Sadbhav Lenders turn down NARCL offer, settle it out of court

Synopsis

Sadbhav Engineering lenders have chosen an out-of-court debt restructuring. This decision bypasses an offer from NARCL. A consortium-led plan was approved by lenders. The company finalized a ₹1,517 crore restructuring package. This move aims to resolve stressed assets outside insolvency courts. The agreement involves convertible debentures and equity conversion. Lenders include PNB, Union Bank of India, and Axis Bank.

Mumbai: Lenders to Sadbhav Engineering have opted for out-of-court debt restructuring under the Reserve Bank of India framework for this, turning down a revised offer from National Asset Reconstruction (NARCL).

The decision follows a consortium-led resolution plan implemented on March 31 after receiving approval from lenders representing 77.83% by value and 60% by number, led by Punjab National Bank. The recast has been carried out under the RBI's Prudential Framework for Resolution of Stressed Assets.

As part of the resolution, Sadbhav Engineering has finalised a ₹1,517 crore restructuring package with the lenders. The company had executed a master agreement on March 25, 2026, to formalise a comprehensive debt recast under the RBI's stressed assets resolution framework. The agreement covers ₹906 crore of fund-based exposure and ₹610 crore of non-fund-based limits.

Under the plan, the fund-based loans will be restructured into convertible debentures, providing lenders with a staggered recovery mechanism. In addition, a portion of the interest component on these debentures will be converted into equity. Existing and additional promoter debt will also be turned into equity. This is aimed at deleveraging the balance sheet and aligning promoter interests with lenders.

The agreement has been signed with lenders including PNB, Union Bank of India, Axis Bank, Bank of India, Yes Bank and others. IDBI Trusteeship Services acted as security and debenture trustee.

Live Events

NARCL had submitted a bid of around ₹470 crore for the account nearly 18 months ago, then revised it down to about ₹371 crore, which showed cash erosion and delays in resolution. The company's total debt was about ₹1,500 crore. Banks ultimately chose restructuring over a sale to the bad bank as this allowed them to resolve stressed assets outside the insolvency courts, avoiding lengthy proceedings at the National Company Law Tribunal (NCLT).

The restructuring comes after prolonged financial stress at the company. In April 2024, Sadbhav Engineering was admitted to the Corporate Insolvency Resolution Process by the NCLT following defaults on operational dues. However, Sadbhav Engineering had challenged the NCLT order before the National Company Law Appellate Tribunal (NCLAT), which set aside the ruling, following which the company settled dues of operational creditors.

(You can now subscribe to our Economic Times WhatsApp channel)

(Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.)

Subscribe to The Economic Times Prime and read the ET ePaper online.

...moreless

(You can now subscribe to our Economic Times WhatsApp channel)

(Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.)

Subscribe to The Economic Times Prime and read the ET ePaper online.

...moreless