SPS Steels Rolling Mills may opt for debt restructuring

Company has already initiated discussions with banks to restructure around Rs 550 cr loans

SPS Steels Rolling Mills, maker of construction steel products, may opt for debt restructuring as demand for steel products continues to remain weak in the current uncertain economic environment.

While sources indicate that SPS has already initiated discussions with banks to restructure around Rs 550 crore loans, the company claims it is yet to take a final decision.

"It is not yet finalised. But if the environment continues to be like this we may have to restructure our loans. The industry has witnessed a sharp decline in demand," Bipin Kumar Vohra, managing director of SPS Steels Rolling Mills, told Business Standard over phone.

He added that the company may not choose to restructure the entire Rs 550 crore loans. "It is premature to comment how much we will restructure. We are repaying our term loans and probably we will need to restructure the working capital finances. So, the final amount will be lower," Vohra said.

State-run lender Allahabad Bank is the company's lead bank. SPS has also borrowed money from a few other banks including Indian Overseas Bank.

SPS Steels Rolling Mills was incorporated in 1981 in Durgapur and manufactures QST bars under the brand 'Elegant', its website showed. The company has two manufacturing units - in Durgapur, West Bengal and in Bilaspur, Himachal Pradesh - with a production capacity of 0.6 million tonne per annum.

Vohra said while the company was profitable till 2011-12, its finances weakened last financial year. He did not further details on SPS' financial position.

Analysts expressed doubts if banks will be keen to recast SPS' loans as their restructured loan portfolio has expanded significantly in the past couple of years. The Reserve Bank of India (RBI) has increased the provisioning requirement on fresh restructured loans from April 1, 2013. Banks will now need to make provisions at 5 per cent instead of 2.75 per cent.

In addition, for the existing stock of restructured assets, the provisions will also increase to 5 per cent in a phased manner. While Allahabad Bank has a restructured loan portfolio of over Rs 13,000 crore, Indian Overseas Bank's portfolio is around Rs 18,000 crore.