Recast of aggregate loan worth R1,10,772 crore has failed since the corporate debt restructuring (CDR) cell was set up in 2001. This follows the failure of 12 recasts in August and September for an exposure of approximately R10,000 crore. Since inception, while the cell has approved loans worth R4 lakh crore, 97 companies with loans of R70,000 crore have successfully exited CDR.
Among the seven companies whose restructuring failed in August were Moser Baer India (R2,050 cr), Kudos Chemie (R1,900 cr), Surana Industries (R870 cr) and Rathi Steel & Power (R430 cr). In September, debt restructuring of five companies including Sujana Towers (R1,060 cr), Shiv-Vani Oil & Gas Exploration Services (R2,100 cr) and Indosolar (R790 cr), failed.
Mythili Balasubramanian, chairman of the CDR cell, recently said that most packages fail because of promoters’ inability to comply with the CDR provisions. “Among the main reasons for restructuring not working out are the inability of promoters to infuse the requisite equity capital within the defined period and non-compliance to CDR agreement in pledging shares in favour of the consortium of lenders,” she said.
Restructuring schemes also often turn futile because promoters are unable to sell non-core assets to mobilise resources as promised. Balasubramanian said while the moratorium is generally maintained at two years, lenders need to estimate when the company is able to start servicing its debt. “If a company can’t generate sufficient cash flow even after 5 years of recast, then it is not viable to be recast,” she said, adding that moratorium is provided as stressed companies need a breather to ramp up production.
In 2014, four other companies, with total debt obligation of R14,000 crore that had been restructured to make it easier for them to repay loans, failed at the CDR cell.