Hanung Toys & Textiles and Core Education Technologies fail to meet restructuring conditions
Loan recast of two companies — Hanung Toys & Textiles and Core Education Technologies — worth Rs 2,400 crore has failed, bankers aware of the development told FE.
While Hanung Toys’ debt restructuring package was worth Rs 1,800 crore, Core Education’s package was worth R600 crore. “Hanung’s package failed because the promoter could not bring in the equity agreed upon at the time of the recast,” he said, adding that the promoter was supposed to bring in Rs 83.68 crore.
Bankers said among the main reasons for loan restructurings not working out, is the inability of promoters to infuse the requisite equity capital into the company in the defined period, along with delay in repaying the loan after moratorium. Packages also fail if the company is unable to sell its non-core assets.
Earlier last year, four other companies, whose total debt obligations of Rs 14,000 crore had been restructured to make it easier for them to repay their loans, exited CDR.
Once the asset is out of the CDR fold, banks have the option of leaving either writing it off or keeping it on their books as a non-performing asset (NPA). They can also sell the loan to an asset reconstruction company (ARC) as they did with Bharti Shipyard (Rs 5,800 crore) and Hotel Leelaventure (Rs 3,000 crore).\
K Subrahmanyam, former ED, Union Bank of India, had told FE that banks do make an attempt to recover their loans, once the account slips into NPA. “We do not necessarily write off the account immediately,” Subrahmanyam said.
The New Delhi-based Hanung Toys & Textiles had approached its lead banker, Punjab National Bank, for restructuring of its debt under the CDR mechanism and, accordingly, the lead banker referred the matter to CDR
Empowered Group. It was approved on May 23, 2014. In Q1FY16, Hanung posted a loss of Rs 199 crore on the back of Rs 27 crore in revenues, party due to Rs 58 crore in interest outgo.
Headed by Ashok Kumar Bansal as its chairman and managing director, the company’s promoters include Praneet Softech (13.77%), Ashok Kumar Bansal (12.89%), Hanung Processors (6.33), Anju Bansal (6.14).
The Reserve Bank of India (RBI) allows lenders to classify restructured accounts under the restructured-standard category. However, from April 2015, banks have been instructed to classify restructured accounts as NPAs and, given the continued financial strain across corporate India, chances are the NPA portfolios of some lenders could grow bigger.
Mumbai-based Core Education Technologies, whose CDR package has failed as well, provides solutions to entire spectrum of education — pre-school, Kindergarten through 12th grade, vocational education and higher education, across the world.
The company is headed by Sanjeev Mansotra as its chairman and global CEO and promoters include Wisdom Global Enterprises (12.50%) and Core Infrapower (4.54%).
In Q1FY16, the company posted a net loss of R27 crore on the back of R29 crore in revenues and R41 crore paid as interest. It had sought debt recast from the corporate debt restructuring cell in August 2014 and it was approved in September.
With the economy slowing down in the past couple of years, the CDR cell has been inundated with requests for loan recasts as companies saw their revenue growth falling and their cash flows crimped. In FY15, the cell approved 54 cases worth Rs 72,560 crore for recast.
According to data compiled by the CDR cell, no new account was referred to it in the three months to June.
Lenders approach the CDR to provide some relief to companies under stress by means of reducing the rate of interest being paid and also offering a 2-3 year moratorium on interest payments.