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.
Among high-profile cases approved by bankers for recast this year are those of HCC for R3,300 crore, Hotel Leela for a sum of R4,300 crore and Bharti Shipyard which will be allowed more lenient terms for an outstanding of R5,800 crore.
In a report released recently, the equities research team at Standard Chartered Bank notes that there is a high probability that two more large accounts could be added to the CDR pipeline. The report mentions Essar Steel, which has a total debt of R23,000 crore and Deccan Chronicle, which has total borrowings of R3,300 crore. These two accounts, totalling R26,300 crore, will increase the CDR pipeline by a huge 66% to R66,000 crore, or 1.4% of total loans, the report observes.
Last year, bankers cleared restructuring packages for loans worth R39,311 crore while in 2010-11, they allowed easier repayment conditions for loans worth R6,615 crore. The total number of cases referred to the CDR cell was 87 and so far this year, the number of cases referred is 61.
Meanwhile, the Reserve Bank of India (RBI) is in the process of bringing in a tighter debt restructuring regime based on the recommendations of the Mahapatra committee. Last year, the value of loans for which borrowers sought easier repayment terms jumped nearly 200% to R67,000 crore.
Seven new loan recast cases amounting to around R2,200 crore were referred to the CDR cell in August, said a senior banker, compared with 17 cases worth R7,500 crore in July. Pharmaceuticals firm Ind-Swift Laboratories sought lenient terms to repay R873 crore. Punjab National Bank with an exposure of R405 crore is the lead banker for this account. In the April-June quarter, the Chandigarh-based company posted revenues of R305 crore and a net loss of R43 crore.
The promoters of Seven Hills Healthcare have requested bankers for a recast of R763 crore. Axis Bank has the largest exposure of R416 crore to the hospital chain. Viajayanagar Sugar (R390 crore), Dharani Textile (R63 crore) and Neesa Infrastructure (R101 crore) were some of the other cases that were referred to the CDR cell in August.
Even as the RBI works towards tightening norms for restructuring, bankers are becoming stricter. They are insisting on personal guarantees, which the RBI panel has said, should be mandatory. The committee has also called for higher promoter contribution at 15% of the diminution in fair value or 2% of the restructured loans, whichever is higher. That apart, it has suggested that banks reclassify restructured loans as non-performing assets after two years and suggests stricter norms for banks to convert loans to equity or preferential shares.