Between its inception in 2001 and March 2013, the corporate debt restructuring (CDR) cell will have successfully negotiated the exits of over 80 cases worth over R60,000 crore. While there were 57 exits valued at R43,077 crore till September, another 25 cases valued at close to R18,000-20,000 crore are in the exit pipeline for the remaining two quarters of 2012-13.
There could be unsuccessful exits too ? until September, around 70 cases valued at R9,403 crore exited the cell, following the loans turning bad. The CDR cell has approved over 300 cases of recasts aggregating about R1,70,000 crore, so far.
The CDR cell negotiates the exits of companies whose loans are being restructured if they have fulfilled certain conditions and shown consistent financial performance. Companies need to have been in the CDR mechanism for at least 5 years, reported a 25% growth in earning before interest, tax, depreciation and amortisation (Ebitda) for the last 2 years, declared more than a 10% dividend and undertaken major capex expansion.
Recent successful exits include Essar Oil, admitted in 2003-04 for a debt of around R2,300 crore. Also pharma major Wockhardt, which entered the cell in 2009, utilised the cash from its nutrition business sale to Danone to retire its R3,000-crore debt.
India Cements, with a debt recast of around R1,800 crore, is amongst those expected to exit the cell in the coming months. Some of the other cases being considered for an exit, include Nilachal Ispat Nigam, Nagarjuna Fertilisers and Ginni Filaments.
Bankers say that companies referred to CDR are those that are in financial difficulties owing to external factors beyond the control of the promoters. Also, only those cases which have a genuine chance of revival are admitted into the cell.
However some bankers say that the timeline for exits must be capped at 5 years to avoid misusing the cell for easier loan terms. Companies under the CDR mechanism receive favorable loan terms with lower interest rates as compared to what prevails in the market. ?There are some companies that have not exited the cell for seven to eight years. This drains the banks resources,? the banker said.
The CDR cell is a forum for lenders to ease loan terms for companies that are struggling with their finances. A loan is eligible for CDR only if at least 75% of the creditors by value and 60% by number approve its referral to the CDR cell. Loans worth Rs 50,000 crore have been referred to the corporate debt restructuring cell (CDR) between April and October this year.