India Inc woe: Corporate debt restructuring at a high in 2012 worth Rs 84,000 cr

Feb 04 2013, 14:55 IST
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A total of 491 cases, involving total debt of Rs 2.67 lakh crore, have been referred to CDR cell. (Reuters) A total of 491 cases, involving total debt of Rs 2.67 lakh crore, have been referred to CDR cell. (Reuters)
SummaryA total of 491 cases, involving total debt of Rs 2.67 lakh crore, have been referred to CDR cell.

In a growing sign of companies facing difficulties in meeting their financial obligations, banks were approached for debt restructuring in a record 126 cases during 2012 for a collective amount of Rs 84,000 crore (over USD 15 billion).

During the last quarter ended December 31, 2012 itself, a total number of 25 cases were referred for Corporate Debt Restructuring (CDR) for an aggregate amount of over Rs 20,000 crore, shows the data available with the CDR cell of bankers.

RBI had helped set up CDR system in 2001 to help the corporates facing financial difficulties due to "factors beyond their control and due to certain internal reasons."

Besides helping the corporates manage their huge debts, it also seeks to safeguard the interest of banks and financial institutions through restructuring of certain debt cases.

High interest costs, along with overall sluggishness in domestic and global economies have made it difficult for the companies to meet their debt obligations, which in turn has resulted in a spurt in CDR cases.

As per the latest data, a total of 126 cases involving debt of Rs 84,000 crore were referred for restructuring during 2012. During the year, as many as 86 cases were approved for restructuring of debt worth about Rs 70,000 crore.

At the end of 2012, 50 cases involving Rs 23,000 crore were pending for consideration under CDR mechanism.

During the October-December quarter of 2012, a total 26 CDR requests involving Rs 15,000 crore were rejected.

A total of 491 cases, involving total debt of Rs 2.67 lakh crore, have been referred to CDR cell since its inception. Of this, 362 cases involving about Rs 2.12 lakh crore worth debt have been approved so far, while 79 requests for debt worth about Rs 32,000 crore have been rejected.

In terms of financial year, a total of 99 cases have been referred to CDR cell for an aggregate amount of about Rs 60,000 crore so far in 2012-13. This is a higher number than the referred CDR cases for an entire financial year ever.

In the previous fiscal 2011-12, 87 cases (then a record) with an aggregate debt of about Rs 68,000 crore (over USD 12 billion) were referred for corporate debt restructuring.

The amount of such distressed debt had grown nearly three-fold from Rs 23,000 crore in 2010-11, while the number of cases also grew sharply by 78 per cent.

As per the CDR data, a total of 50 cases involving an aggregate debt amount of Rs 40,000 crore were approved during 2011-12. In comparison, a total of 27 cases with Rs 7,000 crore were approved for CDR exercise in 2010-11.

During the fiscal ended March 31, 2010, a total of 31 CDR cases were approved for debt of Rs 18,000 crore.

Experts say that rising number of CDR cases does not augur well for the banking sector, as also for corporates.

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