Banks to add Rs 770 cr to their Q4 bottomline with JSL exit from CDR

A consortium of banks led by State Bank of India (SBI) will add about Rs 770 crore to their bottomlines during the fourth quarter following the exit of Jindal Stainless Ltd (JSL) from the corporate debt restructuring (CDR) framework. However, this is considered difficult due to outbreak of coronavirus. 

SBI, the lead banker, will get Rs 300 crore from the resolution of this account, while Punjab National Bank (PNB) will write back about Rs 100 crore from this, sources told PTI. Other lenders like Bank of Baroda and Canara Bank too will be able to show cash recovery from this account.

This will add to the profitability of banks in the current quarter and should help in absorbing the new provisions made during this year, sources added.

The case of JSL was referred to the CDR framework in 2009 when the Insolvency and Bankruptcy Code (IBC) did not exist.

Earlier this month, JSL announced its exit from CDR framework. The company received a letter from the consortium of CDR lenders to this effect on March 4.

"Pursuant to this, existing CDR lenders have realised the full recompense of about Rs 275 crore in cash, which will add to their income in the current fiscal itself. Additionally, JSL has fully redeemed the outstanding Optionally Convertible Redeemable Preference Shares (OCRPS), which were issued to the lenders in June 2017, and has paid around Rs 558 crore, taking the aggregate realisation of lenders to around Rs 833 crore," the company had said in a statement.

Earlier, the promoter group entity had infused equity and subsequently JSL issued non-convertible debentures (NCDs) worth Rs 400 crore to Kotak Special Situations Fund (KSSF) and the fund mobilised assisted JSL in redeeming the OCRPS.

"KSSF has also acquired approximately 5 per cent equity stake in JSL through the secondary market, which demonstrates increased investors' confidence in the company's operations and growth outlook," it had said.

The CDR framework came into existence in 2001 with the objective to restructure corporate debt outside the purview of debt recovery tribunals (DRT) and the Board for Industrial and Financial Reconstruction.