Construction and engineering company Gammon India on Monday said that lenders have decided to invoke the Reserve Bank of India’s (RBI) strategic debt restructuring (SDR) scheme to convert a portion of its debt to equity.
In a regulatory filing on BSE, Gammon India said, “That the corporate debt restructuring empowered group (CDR EG) in its meeting held on November 23, 2015, has discussed and noted the invocation of strategic debt restructuring (SDR) in the company by the CDR lenders, pursuant to RBI circular dated June 08, 2015.”
Gammon India’s gross debt at the end of March 2014 stood at Rs 11,061 crore, up 15.4% over March, 2013, Bloomberg data showed. Lenders to the company include ICICI Bank, IDBI Bank, Canara Bank, UCO Bank and Punjab National Bank, among others.
In FY14, the company reported a loss of Rs 729 crore on the back of Rs 3,763 crore in revenues. The finance costs stood at Rs 699 crore. Its CDR package of Rs 13,000 crore in 2013, was among the largest approved in the last two years.
The company is promoted by Abhijit Rajan (5.99%), who is also its chairman and managing director. Other promoters include Pacific Energy (13.20%) and Devyani Estate and Properties (8.93%).
According to the Master Restructuring Agreement (MRA) dated September 24, 2013, executed by Gammon India with the CDR lenders, the company was required to ensure that either the corporate guarantees issued by the company on behalf of its subsidiaries are released in full or the company monetises or divests its investments in the domestic and overseas subsidiaries.
However, the company is understood to have made minimal progress on monetisation of assets and sale of foreign businesses. So far, the company has managed to sell its entire stake in its infrastructure arm Gammon Infrastructure Projects, only to another subsidiary, Gammon Power.
The 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(JLF). They can own up to 51% of the equity of the company. On Tuesday, the Gammon India stock closed at Rs 12.91, down 3.37%, on the BSE.
Following rules put out by the 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, Visa Steel and Coastal Projects.