In a sign of how stressed India’s corporate sector is, loans worth a whopping Rs 50,000 crore have been referred to the corporate debt restructuring (CDR) cell between April and October this year, on the back of R50,000 crore worth of loans having already been recast in the first six months of the year.
Last year, loans worth R39,300 crore were restructured as companies sought easier repayment terms from banks. October saw the largest quantum of referrals so far in 2012-13 at about Rs 14,000 crore. In September, loans worth R7,000 crore were brought to the cell. Among large corporates whose loans have been recast are Hotel Leela, Bharti Shipyard, GTL and HCC. The CDR cell rejected a request from Deccan Chronicle to restructure R4,000-crore loans.
Bankers say the cell received requests in November from at least six companies seeking more lenient terms, including a R1,500-crore loan of the Abhijeet Group. The Abhijeet Maharashtra Airport Development Company, Jai Hind Projects looking to recast R670 crore and Biltube Industries which owes banks R300 crore have been admitted to the CDR cell.
The largest case to be referred to the cell in October included the R10,829-crore debt of wind turbine manufacturer Suzlon Energy. Main lenders to Suzlon include lead lender SBI with an exposure of around R3,500 crore, IDBI Bank (R1,700 crore) and Bank of Baroda (R1,000 crore).
Bankers are in the process of finalising a bailout plan in consultation with the management.
New RBI guidelines on restructuring assets based on the recommendations of the Mahapatra committee are expected by the end of January. The panel has suggested that promoters make a bigger sacrifice to the tune of 15% of the fall in fair value or 2% of the restructured amount, whichever is higher. The RBI panel also feels the conversion of loans into preference shares should be done only as a last resort and conversion of the part of loan into preference shares must be capped at around 10%.
According to an ICRA report, standard restructured advances could move up to Rs. 3.7-4.2 lakh crore or 6.5-7.5% of advances by March 31, 2013 as against Rs. 2.3 lakh crore as on March 31, 2012. It also notes that around 40-50% of banking sector exposure to the power sector may need to be restructured. The report goes on to state that the gross NPAs are likely to cross Rs 2 lakh crore and reach 3.6-3.8% of gross advances as on March 31, 2013, up from 2.8% as on March 31, 2012.
As many as 15-20% of the new cases being referred to the CDR cell are cases seeking a second admission into the CDR cell. A second round of restructuring generally occurs when the first round of restructuring fails to help the company tide through its debt woes. Therefore, it requires further moratorium and debt infusion to revive the business.
Including loans previously restructured bilaterally between banks and corporates (outside the CDR cell), this would raise the tally of cases seeking second restructuring much higher. A recent note from brokerage firm Prabhudas Lilladher, which emerged after a meeting with the CDR cell states that a large proportion (greater than 50%) of the incremental cases being referred now are second restructuring cases.