Energy sees some big-ticket filings under new insolvency law

Most of the cases are transfers from the erstwhile Board for Industrial and Financial Restructuring

In the first six months after notification of the Insolvency and Bankruptcy Code, a number of big-ticket filings were made from the energy sector at the National Company Law Tribunal (NCLT). 

Last month saw insolvency filings worth Rs 10,000 crore from the sector. One of these being Kolkata-based steel company Ramsarup Industries, which has a principal debt of Rs 2,000 crore.

Others in the segment that have gone the insolvency route are Uttam Galva Steel, Gujarat NRE Coke, Marmagoa Steel and Facor Steel. Gujarat NRE Coke, listed on the National Stock Exchange, owes Rs 3,880 crore.

Biodiesel maker Gujarat Oleo Chemical has a debt of almost Rs 5,000 crore and has filed for insolvency at the Ahmedabad bench of NCLT.

Overall filings from the steel sector are a little more than Rs 20,000 crore, some by creditors and others by the corporate debtor itself.

As for filings from the power sector, senior officials from a company that has filed for insolvency blame the government’s erstwhile policies. In August 2014, a Supreme Court judgment cancelled all coal block allocations made over two decades, for reasons of illegality. Around Rs 2.85 lakh crore of investment in 218  blocks allotted over 20 years went down the drain with this order. The judges had also imposed a penalty of Rs 295 a tonne on all 42 operational coal block holders, earning Rs 7,672 crore as total penalty for the government. 

Close to 28,000 megawatt of power capacity is stranded due to de-allocation of the coal blocks. This has hurt a cumulative investment of around Rs 2 lakh crore.

Debashish Mishra, partner at consultancy Deloitte, says: “The diagnosis of magnitude of bad debts in core industries such as metal and power constitute a large chunk of the overall bad debt of banks. Based on Reserve Bank guidelines, banks are taking possession of these assets and look for change of ownership.”

Most of these cases are transfers from the erstwhile Board for Industrial and Financial Restructuring. The Insolvency and Bankruptcy Code was enacted for better restructuring of sick companies and to help banks address their non-performing assets mess.

According to sources, State Bank of India plans to take some companies in the energy sector to NCLT. The bank, largest lender in the country, did not reply to a query on this from Business Standard. Its gross NPAs were Rs 112,343 crore as on March 31, a sixth of the total bad debt of government-owned banks. 

(With inputs from Shreya Jai)