Share Microfin gets Rs 1,200-cr debt recast deal

Hyderabad-based microlender Share Microfin today said 31 bankers, led by SIDBI and ICICI Bank, had agreed to restructure loans worth Rs 1,200 crore given to it.

The agreement for corporate debt restructuring (CDR) gives Share a year's moratorium on repayments on principal and the loans will be restructured over a seven-year period, the microlender's Managing Director, Udaia Kumar, said.

Interest on the outstanding loans has been fixed at 12%, he said, adding a committee of five top banks will now monitor the company on a regular basis.

Share's total debt stands at Rs 1,900 crore, of which Rs 1,200 crore has been restructured and the remaining Rs 700 crore is held by lenders in the form of preferential shares with conversion rights, Kumar said.

Small Industries Development Bank of India's (SIDBI) share is at Rs 350 crore, while ICICI Bank's exposure is Rs 217 crore, he said.

"The CDR package gives us an opportunity to survive," Kumar said.

Microfinance institutions (MFIs) have been facing a difficult time for around a year now, ever since problems erupted in their largest market, Andhra Pradesh.

Some borrowers allegedly committed suicides due to strong-arm tactics of recovery agents, which prompted the Andhra Pradesh Government to enact a legislation last year to control MFIs.

Emboldened by the legislation, borrowers started to default on repayments, which compounded the problems as commercial banks stopped lending to MFIs.

Kumar said repayment rates remain abysmally low at 10% in Andhra Pradesh with no fresh disbursements at all while there is no new lending to MFIs operating in the state from banks.