Loan defaulters’ shares tank on news of RBI’s second insolvency list

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Published: August 29, 2017 6:11:00 PM

Shares of companies including Videocon Industries, Jaiprakash Associates tanked today on news reports of being on the Reserve Bank of India’s second list of loan defaulters on whom insolvency proceedings could be initiated.

Shares of Videocon Industries fell 4.5% to Rs 18.1; Jaiprakash Associates dipped 9.57% to Rs 21.25 on BSE today. (Image: Reuters)

Shares of companies including Videocon Industries, Jaiprakash Associates, Visa Steel and SEL Manufacturing tanked today on news reports of being on the Reserve Bank of India’s second list of loan defaulters on whom insolvency proceedings could be initiated failing the resolution of their outstanding debt by mid-December. CNBC TV18 reported citing unidentified sources that the respective banks may take these companies to the National Company Law Tribunal (NCLT) for bankruptcy proceedings by mid-December if the loan was not recovered. The list prepared by the RBI has names of over 20 companies.

Shares of Videocon Industries fell 4.5% to Rs 18.1; Jaiprakash Associates dipped 9.57% to Rs 21.25; Visa Steel Ltd dropped 12.28% to Rs 17.5; while, SEL Manufacturing plunged 14% to Rs 2.52 on BSE today. These are four of the over 20 companies which included in the list, according to the CNBC TV18 report. Other names include IVRCL, Castex, Ruchi Soya, Unity Infra, Uttam Galva, Monnet Power, Orchid Chemicals, Shakti Bhog, Nagarjuna Oil, Jai Balaji Industries, Soma Enterprise, Soma Coast Energy, Asian Colour Coated, Essar Projects, Transstroy India, Ushdev International and Jayaswal Neco.

In the first tranche, the Reserve Bank of India had identified 12 accounts with large unresolved NPAs (nonperforming assets) for speedy action on the recovery of dues. NCLT had already approved insolvency proceedings against Lanco Infratech after RBI directed the company’s lead lender IDBI Bank to do so. Lanco Infratech has about Rs 18,000 crore in unpaid dues.

Insolvency proceedings for Essar Steel already began this month, with the NCLT admitting the case earlier this month, after the Gujarat High Court dismissing the company’s petition against the Reserve Bank of India in the bankruptcy process initiated on the firm. Essar Steel owes more than Rs 45,000 crore in unpaid dues to lenders. The banks have already declared Rs 31,671 crore as non-performing as of March 31, 2016. The SBI-led consortium of 22 creditors accounts for 93% of this amount.

Further, State Bank of India, which is the lead banker to six other of these 12 accounts, is also reportedly in various stages of formulating loan resolution plans and initiating bankruptcy proceedings against those companies.

Earlier May, the government notified an ordinance for speedy resolutions of NPAs in efforts to deal with the problem of India’s chronic bad loans, which have surged to Rs 9.63 lakh crore. According to the RBI, top 12 bad loan accounts make up for Rs 2.5 lakh crore of bad debts, or 25% of the total. The ordinance gave powers to the RBI to direct banks to initiate bankruptcy proceedings against bad debt accounts under the Insolvency and Bankruptcy Code 2016 (IBC).

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