Led by Bharati Shipyard, several assets including Eastern Silk and Unity Infraprojects have turned sour at the mid-sized lender
The core sector continues to spell trouble for Allahabad Bank with exposure in shipping, power, textile and hospitality turning into significant non-performing assets.
Experts said it exposes the banking sector's futile attempt to postpone the inevitable by resorting to restructuring of fundamentally weak companies.
Led by Bharati Shipyard, whose loans totalling about Rs 8,000 crore, were sold off to an asset reconstruction company by half of the bankers including Allahabad Bank, several accounts have turned non performing, burdening the Kolkata-headquartered mid-sized bank with stressed assets, one of the highest in the industry as a percentage of loan book.
Bharati alone drilled a Rs 624 crore hole in Allahabad Bank, as the lender, as part of the SBI-led consortium, in July had sold its loans to Edelweiss Asset Reconstruction Co at a steep haircut of 70%.
Listed entities, Eastern Silk Industries, where the bank has written off Rs 99 crore, and Shri Lakshmi Cotsyn (Rs 65 crore) are the other major NPAs for the September quarter, bank chairman cum managing director Rakesh Sethi told analysts.
These apart, Allahabad Bank suffered a hit of Rs 42 crore due to its exposure to MP Hotels, he said.
While the case of Bharati is well known, Eastern Silk, till recently a leading player in silk exports, had fallen on bad days mainly due to slowdown in export destination countries. In June, the company decided to file a reference with the Board for Industrial and Financial Reconstruction.
Eastern Silk's net worth has been eroded fully and its promoters' holding has been encumbered to Allahabad Bank, which is the monitoring bank for the Corporate Debt Restructuring Cell.
Shri Lakshmi Cotsyn of Kanpur, a textile player too, has also referred itself to BIFR.
Among Rs 1,404 crore of restructuring done by the bank during the quarter, prominent accounts are SEL Manufacturing and Textiles (Rs 634 crore) BLA Power of Chhattisgarh (Rs 108 crore), Emmsons International, a Delhi-based trader of agri-produce and fertilisers (Rs 101 crore), Ankit Metal (Rs 96 crore) and NKB Infra (Rs 64 crore).
"There's a pipeline of Rs 1,000 crore of restructuring of assets consisting of Unity Infraprojects of Rs 184 crore and Rs 118 crore Plethico Pharma," Sethi said.
Unity Infraprojects, which till last year was dreaming to become a Rs 5,000 crore group in the next 3-4 years, had suffered a loss of Rs 49 crore in the June quarter from a profit of Rs 13 crore in the previous year.
Plethico Pharma reported a loss of Rs 11 crore for the June quarter. To make matter worse, Enforcement Directorate in July had slapped a Rs 297 crore showcause notice for alleged forex violations.
Allahabad Bank's woes on the NPA front reflects the predicament of the smaller state-owned banks due to their exposure in sectors all hit by the slowdown in the economy, which is too big for their weak balance sheet to handle.
"The exuberance of the stock market has not yet got translated into my lending book. I don't see anything changed really on the ground as far as credit to corporate sector in concerned," the Allahabad Bank CMD told analysts.
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