Corporate debt revamp up 3-fold at Rs 68,000 cr in FY12

While, amount of distressed debt has grown nearly 3-fold from Rs 23,000 cr, no of cases also up sharply by 78%

In a clear indication of growing financial difficulties of the corporate, a record number of 87 cases with an aggregate debt of about Rs 68,000 crore (over $12 billion) were referred for Corporate Debt Restructuring (CDR) last fiscal.

While the amount of such distressed debt has grown nearly three-fold from Rs 23,000 crore in 2010-11, the number of cases also grew sharply by 78%.

The total corporate debt sought to be restructured last fiscal accounts for nearly one-third of the aggregate debt amount referred for restructuring ever since the CDR mechanism was established by RBI about 10 years ago in 2001.

The preliminary data suggests that the sharp increase in CDR cases has continued unabated in the current fiscal, as nearly three dozen cases involving nearly Rs 20,000 crore were referred to CDR cell in the first quarter ended June 30, 2012.

RBI had helped set up CDR system in 2001 to help the corporates facing financial difficulties due to "factors beyond their control and due to certain internal reasons."

Besides helping the corporates manage their huge debts, it also seeks to safeguard the interest of banks and financial institutions through restructuring of certain debt cases.

High interest costs, along with overall sluggishness in the domestic and global economies have made it difficult for the companies to meet their debt obligations -- resulting in a spurt in CDR cases.

As per the CDR data, a total of 50 cases involving an aggregate debt amount of Rs 40,000 crore were approved during the last fiscal. In comparison, a total of 27 cases with Rs 7,000 crore were approved for CDR exercise in 2010-11.

During the fiscal ended March 31, 2010, a total of 31 CDR cases were approved for debt of Rs 18,000 crore.

Experts say that rising number of CDR cases does not augur well for the banking sectors, as also for the corporates.

The aggregate amount of debt referred for CDR -- since this system began in 2001 -- crossed Rs 2 trillion in 2011-12, when it reached Rs 2,06,493 crore.

Out of the total 392 cases referred for CDR so far, a total of 292 cases (Rs 1,50,515 crore) were approved at the end of last fiscal, while 59 cases (Rs 20,817 crore) were rejected. Besides, 41 cases involving debt of Rs 35,161 crore were under finalisation of restructure packages.

Industry-wise, the iron and steel sector account for the largest share of total restructured debt (26%), followed by infrastructure (11 pc), textiles (8 pc), telecom (6 pc) and fertilisers (5.6 pc).

In terms of number of approved cases, textiles is on top (59), followed by iron and steel (31), sugar (26), paper and packaging (17), chemicals (15) and infrastructure (13).