Shares of seven out of nine listed companies, which are on the Reserve Bank of India’s list of firms to be forced into bankruptcy under a new regulation for failing to repay their debts, surged in trade today, with most of those stocks reversing yesterday’s losses.
Shares of Monnet Ispat rose as much as 12% to an intraday high of Rs 33.75, and were still trading up 9.63% at Rs 33 on the BSE. Similarly, Amtek Auto shares surged 7.7% to Rs 25.25, and were trading near the intraday high.
The Reserve Bank of India has identified 12 accounts with large unresolved NPAs (non performing assets) for speedy action on recovery of dues. The central bank has directed the lead banker IDBI Bank to initiate insolvency proceedings on Lanco Infratech, which has about Rs 18,000 crore in unpaid dues.
Further, State Bank of India, which is the lead banker to six other of these 12 accounts, will soon reportedly formulate a loan resolution plan before initiating bankruptcy proceedings on those six companies.
Earlier May, the government notified an ordinance for speedy resolutions of NPAs in efforts to deal with the problem of India’s chronic bad loans, which have surged to to Rs 9.63 lakh crore. According to the RBI, top 12 bad loan accounts make up for Rs 2.5 lakh crore of bad debts, or 25% of the total.
The ordinance gave powers to the RBI to direct banks to initiate bankruptcy proceedings against bad debt accounts under the Insolvency and Bankruptcy Code 2016 (IBC). Shares of most of the nine listed companies out of the 12 on the RBI’s list are on a downtrend since then.
However, apart from Lanco Infratech, whose shares are in a free fall since yesterday, hitting their lower circuit for two straight trading sessions, and Jyoti Structures, which plummeted today after yesterday’s smart gains, all the other seven shares have staged smart recovery today.
ABG Shipyard was trading up 3.68% at Rs 11.28; Alok Industries was up 3% at Rs 2.43; Bhushan Steel was up 2.12% at Rs 60.15; Electrosteel Steel was flat at Rs 4.04, after rising 2.5% intraday; and Jaypee Infratech was up 0.46% at Rs 10.9. On the other hand, Jyoti Structures fell 1.8% to Rs 11.55 today after rising as much as 20% yesterday. Lanco Infratech was down 9.57% at Rs 1.7, and was locked in the lower circuit again today.