The corporate debt restructuring (CDR) cell has identified 25 cases for potentially exiting the CDR mechanism, said a senior banking official. The CDR cell generally negotiates the exit of companies whose loans are being restructured in the cell if they have successfully fulfilled certain conditions.
Some of the cases being considered for an exit include Wockhardt Hospitals, Nilachal Ispat Nigam, India Cements, Nagarjuna Fertilizers and Ginni Filaments among others. These companies have a total debt of R18,000 crore.
The official said some of the pre-requisites for exiting CDR cell include cases that have been under the CDR mechanism for atleast five years, reported 25% growth in earning before interest, tax, depreciation and amortisation (ebitda) for the last two years, declared more than 10% dividend, undertaken major capex expansion, made windfall profits etc.
The banker said that if companies show consistent financial performance over the last few years it does not make sense for them to continue in CDR mechanism. Companies under CDR mechanism receive favourable loan terms with lower interest rates compared with what prevails in the market. Wockhardt which had applied to the corporate debt restructuring cell in 2009, will use cash from its nutrition business sale to Danone to retire the debt. Wockhardt posted a 95% rise in net profit in the first quarter of 2012-13. The bottomline of the company grew to R378 crore agaist R194 crore in the previous year, and revenues were up 35% year-on-year (yoy) to R1,426 crore.
India Cements was referred to the CDR cell in 2003 with a debt burden of around R1,800 crore, and Nilachal Ispat Nigam with a debt burden of around R1,400 crore was referred to the cell in 2004. Recently Essar Oil which was referred in 2003 got approvals to exit the CDR cell.
Since the inception of the CDR cell in 2001, there have been around 57 successful exits valued at around R43,077 crore. There have also been 70 cases valued at R9,403 crore which have exited without being to able to recover their businesses. ?The ticket size of the loan cases that have failed are smaller. This is because the urgency to save cases that are small-ticket is much lesser,? 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. Just five months into 2012-13, the quantum of loans being referred to the corporate debt restructuring (CDR) cell has hit nearly R30,000 crore, with R2,200 crore brought to the cell in August itself. In 2011-12, there were a total of 87 cases valued at R67.088 crore referred to CDR cell. Of this R39,311 crore was approved by the CDR cell.