Led by State Bank of India, lenders to Kolkata-based Concast Group have given informal consent to restructure Rs 5,000 crore debt of eight of the group’s companies via the corporate debt restructuring cell. Sources privy to the development told FE that the plan is to merge the eight companies into one entity.
“Bankers have informally consented the recast of Concast, but have not given official mandates to restructure the account. The mandates are expected to come by March 30,” a source said, adding that lenders could convene a meeting at the CDR cell on March 31 to approve it within the forbearance deadline.
Between April 2014 and February 2015, the CDR cell okayed recasts worth R 51,250 crore. That compares favourably with the R1.01 lakh crore restructured in FY14 and R78,000 crore in FY13 but bankers say many mid-sized and small companies are in trouble.
“Owing to falling international steel prices, Concast could not make enough profit to service their debt. A joint lenders’ forum (JLF) was convened and the case was referred to the CDR cell in January,” said a lender who is part of the consortium.
Between April and September, most of the requests for recasts came in from such firms. Among these were Shriram EPC for an amount of R2,400 crore and JKC Projects which was looking to restructure R1,630 crore. However, it is not as though larger firms aren’t seeing financial stress as earlier this week lenders to Pipavav Defence and Offshore Engineering approved a R12,000-crore recast package.
From April this year, any restructured asset must be classified as a non-performing asset, following revised guidelines issued by the Reserve Bank of India. This would require banks to set aside a larger amount by way of provisions of 15% of the value of the asset. Currently the provisioning is only 5% since the asset is categorised as a standard restructured asset.
RK Bansal, chairman of the CDR cell, had told FE recently that he expects banks to approve more accounts by March end so as to avoid more NPAs.
Corporate debt restructuring is a mechanism that requires an approval by a super-majority of 75% creditors (by value) which makes it binding on the remaining 25% to agree to the majority decision and covers only multiple banking accounts and consortium accounts with exposure of Rs 10 crore and above.
Concast, which has a presence in diverse sectors from steel products to cement production and real estate, includes Corporate Ispat, Dankuni Steel, Concast Bengal Industries, Concast Exim, Concast Global, Concast Vyapaar, Surekha Exports and Concast Steel and Power. It is led by Sanjay Sureka as its chairman and managing director. Concast Ispat, the group’s flagship company, has its manufacturing facility in Sodepur, West Bengal, and is a producer of TMT bars and wire rods. It also produces finished steel products for the real estate and industrial sectors. The company had reported a profit of Rs 10.6 crore in FY13 on the back of Rs 1,138 crore of revenues in the same period.