CRISIL downgrades Su-Raj Diamond

Banks approach RBI fearing hit on balance sheet; GJEPC steps in for firefighting

Rating agency CRISIL on Thursday downgraded gems and jewellery group, Su-Raj Diamond Industries and two of its entities to the “D” grade, following default in repayments to lenders.

“The rating action reflects delays of over 30 consecutive days by Su-Raj in servicing its maturing letter of credit obligations. The delays have been caused by a weakening in Winsome group’s liquidity due to a sudden stretch in its receivables,” CRISIL said in statement tonight. The two group entities downgraded are Winsome Diamonds Ltd and Forever Precious Jewellery Ltd.

“The group has not been receiving any payments from most of its customers since early March 2013, unlike earlier, when it received payments from them regularly. The group continues to be in discussions with its bankers for debt restructuring and with its customers for realisation of its receivables,” CRISIL said.

A senior public sector bank official said the company had defaulted on payment to some foreign banks. These foreign banks had extended money against the guarantees provided by a few Indian banks including Punjab National Bank.  

Following the default, international banks had invoked guarantees, making it a funded exposure for some Indian public sector and private banks. Since payments are not coming through, there is risk of exposure turning into bad loans. Banks will have to make huge provision of non-performing assets. The extent of exposure (following invocation of guarantees) is in excess of Rs 4,000 crore.

“This event has snowballed into a crisis. Banks have approached the Reserve Bank of India to look for a solution,” said one senior PNB official. He declined to further elaborate on it. Meanwhile, Gems and Jewellery Export Promotion Council (GJEPC) has received letters from banks who have given loans to Su-Raj Diamonds, asking the council to intervene and mediate as the company has defaulted on loans.

A member from the council on Thursday had a telephonic conversation with the company promoter and he has agreed to resolve the issue with all the banks, said Vipul Shah, chairman of GJEPC.