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Our Cutting-Edge Approach Helped a Reputed Financial Institution in Valuing a Combination of Assets

By July 20, 2022Case Studies3 min read
NBFC - Rakesh Narula

Introduction

The NBFC, being a lender, works as a financial creditor for corporate or companies –  a large number of which defaulted on the repayment of their loans.

Current/The Situation

Many infrastructure and real estate companies had been financed under mortgage by one of the renowned NBFCs. After a few years of repayment, the bank began pursuing the companies for the Equated Monthly Installments. 

Challenges Faced By NBFC

  • The Corporate Debtors were triggered by the NBFC & they decided to value all the assets which were under mortgage
  • All entities were having a combination of assets. (i.e. immovable properties, personal guarantees, etc) 
  • Immovable properties involved Residential & Commercial properties both. 
  • All the assets including immovable properties were having pari-passu shares with the NBFC & other banks too.

In order to meet these challenges & find a viable solution, NBFC appointed us as their valuers to provide valuations on all assets

Challenges we faced

  • How to approach the Valuation of Immovable properties?
  • If an approach is determined then how to value the immovable properties according to the created pari-passu charges
  • How to value the guarantees & pledge of shares?
  • The presentation of values

Our Approach

Wherever there is a single charge the estimated value has been directly mentioned. For the securities against which charges are created by more than one borrower, the estimated values have been derived based on the ratio of the sanctioned loan amount of that particular borrower out of the total sanctioned loan amount of all the borrowers against that particular security. The values against each such charge are the value of the security on a pro-rata basis of the sanctioned loan amount.

Conclusion

We:

  • personally visited the sites & according to the nature, stage & condition of assets, we decided to follow standard approaches and methods to determine the values. 
  • determined the approach, finalized the value of the assets. After that, we plotted the values against each percentage of shares & determined the value on a pro-rata basis. 
  • analyzed the latest financial position of the corporate guarantors & adjusted the net assets of the corporate guarantors.

Every time there is a single charge, the estimated value is directly stated. There were some places where estimated values exceeded total dues, and the value of the debt due was adopted as its valuation.

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