Alok Industries & Parekh Aluminex add to Federal Bank's NPA issues

Apart from these two there were three other corporate accounts that slipped into NPA

Federal Bank is having a surge in bad debt problems.

Two large corporate accounts, to Alok Industries and to Parekh Aluminex, shave recently slipped into the bad loan category, two sources told Business Standard. And, three other corporate accounts have also becomes non-performing accounts (NPA) — one from the pharma packaging segment, one from petrochemicals and another from a hygiene & healthcare category.

Bankers say Alok Industries had been finding it difficult to service its debt for some quarters. On May 27, ratings agency CARE suspended those it had assigned to the bank facilities and non-convertible debenture (NCD) issues of Alok. It did so as the company did not furnish the information required to monitor the ratings, CARE said.

On October 1, 2014, CARE had also downgraded its rating for Alok's long-term loans and NCDs from BBB to BBB-, with a rise in its receivables as of end-June 2014. The total long-term and short-term exposure of Federal at the time was Rs 18,585 crore. The NCD exposure was around Rs 1,000 crore.

Alok is promoted by the Jiwrajka family. It is an integrated textile company, present across the value chain — cotton spinning, polyester yarn, apparel fabrics, home textiles and garments.

And, Parekh Aluminex is said to be the country’s largest exporter of aluminium containers. Federal declined to comment on both, saying it did not comment on client details. In April 2014, CARE suspended its rating for Parekh's bank facilities and instruments, again saying the company wasn't providing the needed information to monitor it.

By Federal's Basel-III disclosure, as of end-September it had exposure of Rs 1,375 crore to the textile sector and Rs 2,354 crore to the metals sector.

In the quarter ended September, the five corporate accounts in question led to Rs 174 crore of fresh accretion in NPA. Apart from this, Rs 155 crore from small and medium enterprises, Rs 57 crore from retail and Rs 19 crore from agriculture were fresh NPA additions. As a result, the bank's asset quality came under further pressure in the quarter, with gross NPA a percentage of total advances increasing to 2.9 per cent, from 2.1 per cent in the corresponding period a year before.

The net NPA ratio also rose, to 1.3 per cent from 0.7 per cent in the September quarter last year.As a result, provisioning (other than tax) also almost doubled to Rs 87.3 crore from Rs 45.7crore in the same quarter a year before, pushing profit down by 33 per cent.