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Union Bank of India fails to get bidders for its bad loans

Union Bank of India did not receive any bid for non-performing loans put on sale, including those to Visa Steel and Horizon Hotel, because the floor prices it set were higher than recent trades in these loans, people aware of the development said.

Union Bank had put on sale a ₹410-crore loan of bankrupt Visa Steel and set the reserve price at ₹164.28 crore, entailing a recovery of at least 40%. For the ₹212-crore debt to Hotel Horizon, the reserve price was set at ₹165 crore, seeking at least 77% recovery.

The “offer price was higher than the last trades and so it did not receive any bids in the auction held last week,” a bank official said on condition of anonymity.

For example, the State Bank of India had last month sold ₹ 697-crore Visa Steel loan to Ares SSG-backed Asset Care Reconstruction Company (ACRE) for ₹230 crore, resulting in a 33% recovery on the loan.

Union Bank had put on sale nine accounts including Phadnis Properties, Bellona Estate Developers, and Varrsana Ispat on a 100% cash basis. It had asked interested bidders to submit bids above the set reserve prices by March 8. No one expressed interest.

In September 2022, too, the bank failed to attract any bid after it put on sale ₹ 2,077 crore debt of KSK Mahanadi Power, setting the reserve price at ₹919 crore, resulting in a recovery expectation of 44%. The loan was put on sale on the heels of SBI closing sale of KSK Mahanadi’s ₹3,815 crore loan to Aditya Birla ARC for ₹1,622 crore, equating to a recovery of 42%.

Union Bank managed to sell the loan in its second attempt last month at ₹828 crore to ASREC (India) ARC, which was a 40% recovery on the loan.Union Bank’s net NPA at the end of the December quarter stood at ₹16,195 crore, down 35.88% from ₹25,258 crore a year earlier, while its gross NPA was at ₹63,770 crore as of December 31, 2022.

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