The 12 assets referred to the National Company Law Tribunal (NCLT) could see some resolution in the next three to four months, Varsha Purandare, MD & CEO of SBI Capital Markets told Shayan Ghosh and Shamik Paul. She also said sectors like roads, solar power and oil and gas are showing early signs of revival. Excerpts:
What is the progress on the cases referred to the NCLT?
The Insolvency and Bankruptcy Code (IBC) is definitely a big push and there is a lot of positive feeling about the process. Among the first 12 cases, around four to five are reaching certain milestones, which we think is very positive for resolution. We are working in close coordination with banks in many of these cases and in some of these cases, we have been appointed as process advisors to the interim resolution professional (IRP) or to the committee of creditors (CoC). I am very hopeful that in the next three to four months we should be seeing some resolution, and many lenders feel that way as well. There may be some implementation issues in the initial stages.
Having said that, any new product will have implementation issues but the positive side of this is that everybody is trying very hard to ensure the resolution to these obstacles, right from the government to the regulators. When are the potential investors likely to place their bids for the stressed assets? Most of the cases have still not reached the stage of bidding and this should happen anytime between December and January. But as of now, there are people who are working on the due diligence. The initial two to three cases may take some additional time till the entire system stabilises and all issues such as MAT/ITax are resolved. Investors will put in their bids only after they get a clarification on the taxation aspect.
What is your role in the resolution process?
As SBICAP has been working in close coordination with banks in the past, we have garnered enough knowledge and expertise in terms of restructuring, and this is the reason many IRPs have appointed us as process advisors. To give you an overview of this work, process advisors try to develop the resolution process like putting up the request for proposal (RFP), deciding upon a criteria for RFP, reaching out to as many potential bidders as possible. Another aspect is to run a data room. The data room is required to do the due diligence and know your customer (KYC) and we ensure that bid secrecy is maintained. We also work as an intermediary between potential investors and the IRP in case some additional data is sought about the company. That apart, we analyse each bid, work out how much money will come to the lenders, the net present value (NPV) etc.
Are you seeing signs of revival in the private sector?
We have already started seeing green shoots in some sectors in terms of credit revival. Solar power is one and roads and oil & gas sectors are the others. There are a few steel companies where we are seeing a lot of bidders coming in due to the NCLT process. Currently, these are more on the lines of initial interest evinced since they are yet to come with final bids. But, there is certainly a lot of interest and there is a likelihood of revival. There are a lot of corporates that are heavily indebted and leveraged. Many of these companies have been trying to deleverage. And they are consolidating, selling many of their non-core assets or businesses.
There are also a few groups who are financially strong and know their core business very well and have come out publicly and said that they want to grow organically or inorganically in the domestic sector. So, we definitely have these corporates who are financially strong, who can leverage their strength and can still grow. They are ready to grow inorganically as well. We are also seeing a lot of global interest. On the other hand, there are other corporates who have the strength of their core business and are partnering with financially strong entities in bidding for assets.
Are you seeing a lot of corporates moving to the bond market to raise funds?
Usually, the bond market is able to give long duration funds say for a period of 10 years or beyond. Many of the banks who were funding infrastructure projects in the past had issues because they were funding long-term projects with short-term funds. Till the construction stage, the projects could be funded through bank loans and post the operational and stabilisation of operations, the loans could be re-financed by the bond market. In the future, I see that there will be 5-6 large banks that will look at infrastructure funding.
As told to Shayan Ghosh and Shamik Paul