Patel Engineering on Monday said the Overseeing Committee (OC) has approved the company’s debt recast plan under the Reserve Bank of India’s (RBI) scheme for sustainable structuring of stressed assets (S4A). In FY17, the company reported a net profit of Rs 41.8 crore on the back of Rs 2,925.55 crore in revenues. In the June quarter of FY18, it posted a net loss of Rs 4.72 crore on revenues of Rs 556.37 crore. Its total debt stood at Rs 3,850 crore in FY17, according to Bloomberg data. The company said in a regulatory filing that its sustainable debt (Part A) amounts to Rs 1,724 crore and unsustainable debt (Part B) amounts to Rs 1,239.48 crore. “The non-fund based (NFB) debt shall be Rs 3,855 crore (including additional non-fund based limits proposed under the scheme,” the filing said.
Lenders to the construction services company include ICICI Bank, Bank of India (BoI), Dena Bank, Canara Bank, Bank of Baroda (BoB), Union Bank of India, Corporation Bank and Axis Bank. The statement added that promoter’s dilution of shareholding will be 18.18% of the equity shares held by them as per the S4A scheme. “Part B debt of Rs 1,238.77 crore shall be converted to optionally convertible debentures (OCDs) to carry a coupon rate of 0.01% per annum, payable annualy and YTM of 7% with a tenure of 10 years,” it said, adding that the promoters will arrange to infuse additional funds of Rs 150 crore in two tranches of Rs 75 crore each. “The first tranche of Rs 75 crore will be at the time of implementation of S4A,” Patel’s statement said.
Interestingly, a group of 27 financial institutions and banks own 51.94% of the company after lenders had used RBI’s strategic debt restructuring (SDR) tool to convert debt into equity. The company is promoted by the Patel family who collectively own 1.86%, Patel Corporation LLP (11.89%), Praham India LLP (10.67%), among others. S4A is a more lenient scheme towards lenders because the sustainable debt needs to be not less than 50% of the total debt implying a haircut of 50% or less.
The scheme, however, does not permit changes in either the moratorium or the payment terms for either the principal or the interest. Banks are permitted to covert the ‘unsustainable’ part of the debt into equity or redeemable cumulative optionally convertible preference shares (CRPS). The Patel Engineering scrip closed at `76.80 on the BSE on Monday, down 1.54% from its previous close.