Loan recasts of four companies — Abhijeet MADC Nagpur Energy (AMNEPL), Global Coke, Tirupati Infra and Soma Textiles and Industries — worth close to R2,000 crore have failed, bankers aware of the development told FE.
Abhijeet MADC had the highest bank loans at R1,000 crore, followed by Kolkata-based Global Coke at R400 crore, Tirupati Infra R300 crore and Soma Textiles at R150 crore. Bankers said among the reasons for loan restructurings not working out is the inability of promoters to infuse requisite equity capital into the company in the defined period, along with delay in repaying the loan after moratorium. Packages also fail if a company is unable to sell its non-core assets.
Last year, four other companies whose total debt obligations of R14,000 crore were restructured to make it easier for them to repay their loans exited the corporate debt restructuring (CDR) mechanism.
Once the asset is out of the CDR fold, banks have the option of either writing it off or keeping it on their books as a non-performing asset (NPA). They can also sell the loan to an asset reconstruction company (ARC) as they did with Bharti Shipyard (R5,800 crore) and Hotel Leelaventure (R3,000 crore).
K Subrahmanyam, ED, Union Bank of India, had told FE that banks do make an attempt to recover their loans once the account slips into an NPA. “We do not necessarily write off the account immediately,” Subrahmanyam had said. Meanwhile in May, after AMNEPL defaulted on its debt, lenders, led by Axis Bank, put its loans on the block.
The company’s debt was restructured in March 2013 by the corporate debt restructuring (CDR) cell. Banks have sought bids from asset reconstruction companies (ARCs), bankers told FE.
Based in Nagpur, the company is part of a group that has presence in the core sector areas of power, roads, mining, EPC, ferroalloys, steel and cement. Companies belonging to Abhijeet Group are not listed on the stock exchanges, but the estimated debt of the group stands at R12,000 crore.
While Global Coke is a producer of metalurgical coke headed by Devendra Kumar Ojha, Soma Textiles is based in Ahmedabad and is led by SK Somany as its chairman and Arvind Somany as managing director.
In FY14, Global Coke posted a net loss of R96.1 crore.
Among these companies, only Soma Textiles and Industries is listed on the BSE. Its scrip rose 4.89% on Wednesday and closed at R4.72. The Reserve Bank of India allows lenders to classify restructured accounts under the restructured-standard category. However, from April 2015, banks have been instructed to classify restructured accounts as NPAs and, given the continued financial strain across corporate India, chances are the NPA portfolios of some lenders could grow bigger.
With the economy slowing down in the past couple of years, the CDR cell has been innundated with requests for loan recasts as companies saw their revenue growth falling and their cash flows crimped. In FY15, the cell approved 30 cases worth R39,230 crore for recast.
According to data compiled by the CDR cell, no new account was referred to it in the three months to June. Lenders approach the CDR to provide some relief to companies under stress by means of reducing the rate of interest being paid and also offering a 2-3 year moratorium on interest payments.