SBI to Sell Personal Guarantees of Former Reliance Naval Promoter

State Bank of India (SBI) has started the process to sell personal guarantees given by Nikhil Gandhi, the former promoter of Reliance Naval and Engineering. The bank has set a reserve price of ₹3.48 crore, which is less than 1% of the ₹1,160 crore principal claim on the personal guarantee.

This transaction is notable as it would be the largest secondary market trade for personal guarantees by any lender, highlighting that recovery from personal guarantees could be much smaller compared to the claim amount, according to a senior official from the distressed loan industry.

SBI’s notice states that as of May 31, 2024, the bank has principal outstanding dues of ₹1,160 crore and total dues of ₹3,512 crore. The bank aims to assign the remaining debt along with the guarantee.

Nikhil Gandhi and his brother Bhavesh Gandhi provided personal guarantees, while SKIL Infrastructure gave corporate guarantees on the loan.

Nikhil Gandhi was not available for comment despite repeated attempts.

Reliance Naval, previously owned by Anil Ambani, was sold for ₹2,108 crore last year under the Insolvency and Bankruptcy Code (IBC). Swan Energy partnered with Hazel Mercantile through Hazel Infra to acquire Reliance Naval.

In December, the Supreme Court upheld the IBC provision allowing lenders to recover overdue money from personal guarantors of corporate debtors. This means lenders can invoke this provision if they cannot recover the full debt after selling the company under IBC, provided the promoter gave a personal guarantee.

For Reliance Naval, financial creditors had claims of ₹12,429 crore, with lenders recovering about 17%. This allows lenders to recover the remaining debt by invoking personal insolvency provisions.

SBI has invited expressions of interest by May 31 and scheduled an auction for June 25.