Already holding a 32.02% stake in Hyderabad-based IVRCL, lenders to the construction company are now looking to effect a strategic debt restructuring (SDR), two senior bankers aware of the development told FE. In the process, banks plan to pick up the 8.7% of equity capital remaining with the owners and to try and bring in a new promoter.
IVRCL’s gross debt at the end of March 2015 stood at Rs 9,386 crore, up 12.6% over that in March 2014, Bloomberg data showed. In FY15, it reported a loss of Rs 672 crore on the back of Rs 3,117 crore in revenues. Finance costs alone stood at Rs 653 crore. The debt of Rs 7,000 crore was restructured under the corporate debt restructuring mechanism in July last year.
Among the lenders to the firm are Andhra Bank, Punjab & Sind Bank, Union Bank of India, Canara Bank, State Bank of India and Central Bank of India. Those banks that hold a stake in the company are Andhra Bank ICICI Bank, Indian Overseas Bank, IDBI Bank, Canara Bank and Corporation Bank.
IVRCL’s promoters owned a mere 8.7% in the company as of June 30. They include E Sudhir Reddy who owns a stake of 3.13% and is the chairman and managing director, E Sunil Reddy (0.52%), SV Equities (0.54%) and Soma Hotels & Resorts (2.43%).
While most lenders in the consortium are convinced there is a need to usher in a new promoter, a couple of banks are yet to take a decision, sources said.
Two senior public sector bank executives confirmed to FE the consortium of 21 bankers led by SBI was working on closing finalising the details of the SDR. “We should be able to complete the work in a couple of weeks,” one executive said, adding the lenders had indicated to the promoters there was no other way out.
SDR rules allow banks to convert a company’s debt into shares at a price below the current market value or an average of closing prices in the 10 trading days before a decision is taken at the joint lenders’ forum. They can own up to 51% of the equity of the company. On Tuesday, the IVRCL stock closed at Rs 8.13, down 0.25%.
Following rules put out by Reserve Bank of India (RBI) in June this year, bankers have decided to try out a restructuring for a handful companies including Electrosteel Steels, Jyoti Structures, Lanco Teesta Hydro Power, Monnet Ispat and Coastal Projects.
In its FY15 annual report, the company said that cumulative impact of sluggish growth, delays in payment from clients along with a combination of tightened liquidity conditions and an inflationary environment has caused a liquidity stress on IVRCL which in turn causing loss to the company.