Dca Probes Debenture Default

The department of company affairs (DCA) is probing more than 450 companies that are alleged to have defaulted on the repayment of principal and interest to debenture-holders. The amount they have collectively defaulted on is Rs 5,000 crore till the end of March 2002.

DCA has asked 39 debenture-trustees to submit their reports on the defaulting companies.

ICICI Bank, one of the largest debenture-trustees, in its submission to DCA, said in March 2002, out of the 472 companies it monitored, 88 companies had listed debentures while the remaining 384 companies had not listed their debentures. Of the 88 listed, 62 companies have defaulted on payments and the remaining 16 are irregular in their payments. These 62 companies have more than 100,000 debenture-holders among them.

Almost 50 per cent of the 384 companies which have unlisted debentures have been defaulting over a period of time. However, in the case of unlisted debentures, small investors have escaped unscathed, by virtue of the debentures not being listed. Those affected are institutional investors including banks, mutual funds, financial institutions and high net worth individuals. The Unit Trust of India (UTI) is one of the largest organisations at the receiving end on this delinquency, along with IFCI.

The list of debenture defaulters includes non-banking finance companies, steel, chemicals and textile companies.

The worst part is that in most cases debenture-trustees themselves invested in these debentures.

There are in all 39 debenture-trustees and they are expected to submit their reports to DCA shortly.

The debenture trustees include the IFCI, the Industrial Development Bank of India, IL&FS, Integrated Enterprises, JP Morgan Chase Bank, Karnataka State Financial Corporation, PNB Capital Services, Punjab and Sind Bank, Punjab National Bank, SICOM Ltd, the State Bank of Bikaner and Jaipur, the State Bank of Hyderabad, the State Bank of India, the Bank of India, the Bank of Baroda, and the Indian Bank.