Following a restructuring of its debt via the sustainable structuring of stressed assets (S4A) scheme, HCC’s loans have fallen to Rs2,967 crore from the earlier Rs4,988 crore. Together with the optionally convertible debentures issued to lenders, for an amount of Rs1,430 crore, the total debt works out to Rs4,397 crore.
Banks now hold around 22.91% of the firm’s equity capital after 23.15 crore equity shares worth Rs808.55 crore were issued to them. With the equity capital up at Rs2,700 crore, the company’s debt-equity ratio has improved to 1.63 times versus 2.58 times as on December 31, 2016.
Earlier, a techno economic viability (TEV) study done by the lenders had found that of the total debt of Rs5,107 crore, Rs2,426 crore was ‘unsustainable’.
Praveen Sood, Group CFO and EVP, HCC, told FE the debt is now more manageable and also that operating environment was improving. “Our order book is healthier than it was two years ago which gives us a good revenue visibility,” Sood said.
HCC’s order book at the end of March was Rs20,390 crore, up 12.5% year-on-year. Nevertheless, analysts believe the near absence of investments by the private sector and the relatively slow decision-making in government as aslo execution challenges will continue to pressure profits of infrastructure firms.
HCC’s standalone net profit for FY17 fell by a sharp 37% to Rs59.4 crore while the income from operations remained flat at Rs4,196 crore.
Pursuant to the Cabinet Committee on Economic Affairs (CCEA) order on arbitration awards, HCC is in receipt of letters from government agencies for release of Rs1,882 crore. Of these, only Rs380 crore has been received by the company so far, and the balance Rs1,502 crore is expected shortly.
The Reserve Bank of India (RBI) had introduced the S4A scheme in June last year. It has been viewed as an improvement over the strategic debt restructuring (SDR) plan since the promoters remain with the firm; the SDR envisaged bringing in a new set of promoters. The S4A scheme is also more lenient since bankers can take an effective haircut of 50%.
The scheme, however, does not permit changes in the terms of either the moratorium or the payments of principal or the interest. Banks are permitted to convert the ‘unsustainable’ part of the debt into equity or redeemable cumulative optionally convertible preference shares (CRPS). To be eligible for the scheme, the projects should have commenced commercial operations and the total exposure (including accrued interest) should be more than Rs 500 crore. Moreover, lenders need to have provided for at least 20% of the total loans.