A proposal to recast Rs 3,890 crore of loans to Soma Enterprise via the scheme for sustainable structuring of stressed assets (S4A) has been sent to the oversight committee (OC), two bankers familiar with the development told FE. If approved by the by Reserve Bank of India (RBI)-mandated committee, it would be the fourth recast to be taken up via the S4A route after HCC, GKC Projects and GVR Infra. The 23-bank consortium to the Hyderabad-based Soma includes UCO Bank, Axis Bank, Andhra Bank, State Bank of India, State Bank of Hyderabad, Bank of Baroda and IDBI Bank. An OC, comprising eminent persons, has been constituted by the Indian Banks’ Association (IBA) in consultation with the RBI and its decision is binding on all members of the consortium.
In FY13 (latest available), Soma Enterprise reported a net loss of R151.35 crore on revenues of R2,122.76 crore primarily owing to interest expenses of R399 crore. The company’s debt had been recast by the corporate debt restructuring cell in November 2013. Soma’s chairman is Rajendra Prasad Maganti and Ankineedu Maganti is the managing director.
The company has evolved from being a pure EPC player to taking infrastructure projects on a build, own and transfer basis and was executing 32 projects in 15 states, according to its website.
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The S4A scheme 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. S4A 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.
To be eligible for the scheme, the projects should have commenced commercial operations and the total exposure (including accrued interest) should be more than R500 crore. Moreover, lenders need to have provided for at least 20% of the total loans.