Rs 869 cr loan: GKC Projects to be second firm in India to undergo debt recast under S4A scheme

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Sriharikota | Published: February 16, 2017 6:47:07 AM

After HCC, Hyderabad-based GKC Projects will be the second firm whose debt will be recast under the scheme for sustainable structuring of stressed assets (S4A), sources told FE. The recast for Rs 869 crore has been approved by the overseeing committee (OC) mandated by Reserve Bank of India (RBI). Lenders to the firm include State Bank of India Axis Bank, Bank of Baroda, IDBI Bank, ICICI Bank, HDFC Bank and Standard Chartered Bank.

rbi-r-lAccording to senior bankers, a little more than half of GKC Projects’ debt has found to be sustainable, making it eligible for an S4A.

After HCC, Hyderabad-based GKC Projects will be the second firm whose debt will be recast under the scheme for sustainable structuring of stressed assets (S4A), sources told FE. The recast for Rs 869 crore has been approved by the overseeing committee (OC) mandated by Reserve Bank of India (RBI). Lenders to the firm include State Bank of India Axis Bank, Bank of Baroda, IDBI Bank, ICICI Bank, HDFC Bank and Standard Chartered Bank.

According to senior bankers, a little more than half of GKC Projects’ debt has found to be sustainable, making it eligible for an S4A.

An OC, comprising eminent persons, has been constituted by the Indian Banks’ Association in consultation with the RBI and its decision is binding on all members of the consortium.

In FY16, GKC Projects reported a net loss of Rs 34 crore on the back of revenues of Rs 1,182 crore primarily owing to interest expenses of Rs 140 crore. The company’s debt had been recast by the corporate debt restructuring cell (CDR) in November 2014. Standard Chartered Bank joined the CDR arrangement through an agreement dated May 26, 2015.

The infrastructure company operates across areas such as irrigation, mining, power, transportation, water and environment. Kolli Venkata Raja Sekhar is the managing director and prominent shareholders in the company include KV Raja Sekhar (92.65 lakh shares), K Anupama (22.5 lakh) and Ram Koteshwar (30 lakh), among others.

The S4A scheme has been viewed as an improvement over the strategic debt restructuring (SDR) plan since the promoters remain with the firm; SDR envisaged bringing in a new set of promoters. The S4A scheme is also more lenient since bankers can take an effective haircut of 50%.

The scheme, however, does not permit changes in the terms of either the moratorium or the payments of principal or interest. Banks are permitted to convert the ‘unsustainable’ part of the debt into equity or redeemable cumulative optionally convertible preference shares. To be eligible for the scheme, the project should have commenced commercial operations and the total exposure (including accrued interest) should be more than Rs 500 crore. Moreover, lenders need to have provided for at least 20% of the total loans.

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