Winsome may dig Rs 4,000-cr hole in consortium of lenders' books

Banks to send inspectors to verify stocks of the jeweller; bullion banks invoke letters of credit

The consortium of lenders who had opened letters of credit (LC) to jewellery firm Winsome Diamonds and Jewellery (formerly Su-Raj Diamonds), for the purchase of gold, are set to take a hit as a significant part of their Rs 4,000-crore exposure will turn bad.

The bankers said they had some collateral attached with the LC, but the amount is not significant. The banks also have control over the stock of Winsome. In the consortium meeting of lenders last week, it was decided to send inspectors to verify the stock. However, bankers said since gold prices have fallen in the last few days, the value of the stock will be depleted.

According to some banks, the company, an export-oriented one, may have exported jewellery to countries that are hit by slowdown. So, the importers delayed payments to Winsome, which in turn defaulted to the bullion banks, from where it had bought the stock.

Following the default, the banks have invoked the LCs which were issued by Indian banks. After an LC is invoked, the exposure of banks becomes non-performing asset, if it remains overdue for 90 days.

“It is possible that problems have cropped for the company because of slow movement of stock,” said a banker. A dozen public sector banks, along with some private and foreign lenders, have exposure to the jewellery firm. “We are looking at all options. First, we have to understand what went wrong with the company. We are expected to meet the promoter of Winsome Diamonds and Jewellery Jatin Mehta in the next couple of days,” said a senior official of a public sector bank, which have an exposure to the company.

Some of the banks that have opened LCs are Punjab National bank, Union Bank of India, Central Bank of India, Vijaya Bank, and IDBI Bank. Standard Chartered Bank was the lead bank of the consortium. Standard Bank of South Africa, Standard Chartered London, and Scotiabank have invoked the LC that the banks have issued for Winsome, after the company failed to pay within 90 days, as agreed at the time of the contract.

According to the company’s website, its core activity includes manufacture and export of gold, silver and platinum jewellery studded with diamonds, colour stones and semi-precious stones as well as plain jewellery. It also manufactures and exports polished diamonds. Winsome was renamed last year and Madan B Khurjekar appointed non-executive chairman.