Domestic financial institutions, led by the Industrial Development Bank of India, have upped their offer to buy the foreign lenders' exposure to the troubled Dabhol Power Company.
The FIs have offered to pay 60 cents to the US dollar (a 40 per cent discount). Earlier, they had offered 45 cents to the US dollar (a 55 per cent discount). The latest offer was made at a round of negotiations which concluded in Mumbai on Friday.
The foreign lenders have not accepted this offer but scaled down their demand of 90 cents to the US dollar and are now prepared to settle for 80 cents to the US dollar.
"The offer and counter-offer was made between the two sides at the Mumbai meeting. The entire issue is now inching towards a solution," sources familiar with the development said.
The foreign lenders have a combined exposure of around $362 million to DPC ($90 million to the first phase and $272 million to the second phase). The domestic lenders have a combined exposure of around Rs 6,300 crore (Rs 63 billion) to DPC.
It is learnt that the foreign lenders are interested in the settlement of the outstanding principal of $319 million and at present, are not pressing for the settlement of interest charges of over $50 million.
The representatives of the domestic lenders' consortium included IDBI Chairman and Managing Director M Damodaran, ICICI Deputy Managing Director Kalpana Morparia and IDBI Executive Director AK Doda.
The meeting was also attended by the US government agency, the Overseas Private Investment Corporation, which has the twin role of lender and political insurer in the project.
The other members of the offshore lenders' consortium who attended the meeting included representatives of ABN Amro, ANZ Bank, Credit Suisse First Boston, Bank of America and Citibank.
The Mumbai meeting was the third in the last one-and-a-half months and followed the ones in Singapore and London.
The hectic efforts to find a solution comes after General Electric and Bechtel acquired the bankrupt US company Enron Corp's 65 per cent stake in the Dabhol Power Company through a complex three-tiered transaction. Their stake in DPC is, however, pledged to the lenders who also have first charge on the assets.
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