In the second quarter, 14 cases with a debt of Rs 8,356 crore failed to keep up their commitments and had to exit from their respective debt restructuring programmes
As economic recovery gets delayed, promoters of several companies identified for corporate debt restructuring (CDR) are failing to bring in their promised contribution for revival of their companies.
Bankers say promoters are losing hope of their companies reviving, and hence are failing to bring in their contribution.
In the second quarter, 14 cases with a debt of Rs 8,356 crore failed to keep up their commitments and had to exit from their respective restructuring programmes.
CDR is a special scheme of restructuring allowed by the Reserve Bank of India (RBI) to revive fortunes of companies who are in genuine distress and have a chance of revival. Failure in CDR leads to bad loans.
But in many cases, the promoters fail to bring in their contributions, forcing the companies out of the CDR process, leading to banks classifying them as bad loans.
Some of the companies whose CDR packages failed to sail through in the quarter ended September 30, 2014 include Eastern Silk Ltd, Nakoda Ltd and Mowana Sugar. Also, some which are admitted for the CDR, including Moser Baer and Sujana Metal, are showing signs of stress with their accounts classified as non-performing assets (NPAs) by some of the banks.
A senior SBI official told dna, "It seems as if the promoters have lost faith in their own companies. This prevents them from bringing in their assured contributions for implementing the restructuring package. But it is a set of complex issues that is plaguing the whole process. Large companies are delaying their repayments to smaller companies. Even public sector companies like Bharat Heavy Electricals Ltd and Bharat Sanchar Nigam Ltd are delaying payments over non-completion issues, lack of equity and non service issues. Bankers cannot give protection for long so we are declaring many of these accounts as NPAs and providing for them."
A senior official from Kolkata-based textile company Eastern Silk said, "Due to the global recession, we have failed to achieve our sales targets which has resulted in strains in our balance sheet. As a result, the CDR package is not going through. We are trying to get a one-time settlement with the banks for the Rs 466 crore the company owes them."
Moser Baer, which defaulted to the tune of Rs 581 crore, is a leading global tech-manufacturing company. A questionnaire sent to the company was not answered.
A senior official from Sujana Metal said, "The CDR process is on but some banks have classified our account as NPA due to disagreements on the package by the unsecured lenders."
CVR Rajendran, chairman and managing director, Andhra Bank, said, "The Joint Lending Forum (JLF), where corrective steps are being taken by the banks when loans are due for 60 days, is also helping to stifle the flow to the CDR process. We are also making very few references to the CDR cell as economic revival for these companies seem distant with promoters not bringing their contribution in many cases, forcing banks to classify them as bad loans and make provisions."
Bankers, however, say projections companies gave about their revival have all gone wrong. "Debt burden is eating into their revenues, sales are not picking up and margins are stretched. The reforms process of the government is taking time and many issues remain unresolved," said a banker whose bank has also brought down its references to the CDR cell.
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