Debt of companies will be restructured under the Indian Insolvency and Bankruptcy Code of India initiated by dissolving existing management and appointing a professional
Leading consultancy firms such as KPMG, Mckinsey and EY will be roped in to help out resolution specialists who are slated to take over the managements of the 12 distressed companies identified by the internal committee of the Reserve Bank of India (RBI).
The debt of these companies will be restructured under the Indian Insolvency and Bankruptcy Code of India which will be initiated by dissolving the existing management and appointing a resolution professional who could be a chartered account, or someone specialised in stressed-asset resolution.
A senior banker said, "The resolution process alone will not be able to handle the affairs of company so we may have to hire the services of the management consultants who will help the lenders run the company for a while before a new management is installed."
Though not many promoter groups may be changed, what is certain is that bankers will take deep haircuts to see the account over the hill. While a resolution expert is necessary to be appointed, it is not necessary to change the existing management if there is a road map for revival.
Meanwhile, marathon sessions of joint lenders are going on to initiate the proceedings under National Company Law Tribunal which is the first step. The joint lenders forum met on Tuesday to discuss resolution process for Bharti Shipyard where banks already hold about 51% stake and a change of management may be incorporated.
The defaulters' list comprises Bhushan Steel Ltd, Bhushan Power & Steel Ltd, Essar Steel Ltd, Jaypee Infratech Ltd, Lanco Infratech Ltd, Monnet Ispat & Energy Ltd, Jyoti Structures Ltd, Electrosteel Steels Ltd, Amtek Auto Ltd, Era Infra Engineering Ltd, Alok Industries Ltd and ABG Shipyard Ltd. These 12 accounts accounted for Rsa 2.5 lakh crore of the gross NPAs of the banking system.
Analyst firm Jefferies said in a report that the aggregate stress in 41 banks put together accounted for 14.7% of loans or Rs 11.3 lakh crore (trillion).The loan's share of this was NPLs at 69%, Restructured assets at 17%, 5-25 at 5%, SDR at 4%, Ownership change outside SDR scheme at 1%, S4A at 1% and Security Receipts at 3%.
...& ANALYSIS
- Though not many promoter groups may be changed, bankers will take deep haircuts during NPA resolutions
- While a resolution expert is necessary, it is not necessary to change the existing management
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