Alok Industries, the textile player whose net worth has been eroded, has approached lenders for fresh funds so that it can increase production, senior bankers told FE.
The highly indebted textile company, which owes bankers a whopping Rs 19,920.6 crore, believes it can boost production if given access to more funds, bankers said.The exposure to Alok Industries has been classified as non-performing assets (NPAs) on the books of banks which had initiated a strategic debt restructuring (SDR) scheme for the firm. The company reported a consolidated loss of Rs 3,774.2 crore for FY16 on revenues of Rs 13,040.9 crore, down 46% over FY15. The company has postponed its annual general meeting to September 8 from August 16 scheduled earlier, according to a BSE filing.
Last month, the Bombay High Court stayed sale of assets and change in the company’s equity structure, keeping banks from converting any loans into equity. The court’s order followed a winding up petition filed by HSBC on behalf of a clutch of unsecured lenders including VTB Capital to settle outstanding dues worth $55 million.“The Alok Industries management is trying to convince State Bank of India (SBI) that if it is lent fresh funds, its performance can improve,” a banker said.
The company has reportedly told banks that capacity utilisation at its plants in Silvassa went up by about 10-15% in Q1FY17. The banker said lenders were yet to take any decision on additional funding to the company.
According to Reserve Bank of India (RBI) guidelines, banks are required to convert the debt to equity within 210 days of the reference date, which, in the case of Alok Industries, was November 27. Even before the SDR failed last month, lenders are learnt to have looked at the possibility of enforcing management change in Alok Industries outside SDR, while they are currently looking at the feasibility of invoking S4A.
Introduced by the RBI in June, S4A allows banks to resolve stressed loans by bifurcating the sustainable portion of the debt from the unsustainable part and converting the latter to redeemable cumulative optionally convertible preference shares.
While the RBI doesn’t prohibit banks from extending fresh loans to a defaulter, bankers are generally reluctant in doing so. “You can say the regulator has allowed it, that it was required in order to revive, but the question is that it is very difficult to manage. As a result, most banks don’t have any incentive once it’s treated as an NPA to do anything about it,” SBI chairman Arundhati Bhattacharya had said at the SBI Banking and Economic Conclave last year.