Aggregate debt in CDR cell rises 50% on a y-o-y basis

Iron and steel sector contribute major chunk at almost 24%

The corporate debt restructuring (CDR) cell of Reserve Bank of India (RBI) saw a nearly 50% rise in aggregate debt, sought to be restructured, on a year-on-year basis, with the iron and steel sector contributing a major chunk of almost 24%.

The CDR cell of RBI received proposals for restructuring aggregate debt worth Rs 2,45,928 crore as on September 2012, against Rs 1,64,294 crore as on September 2011, a rise of almost 50% over the last year. 

Last year, as on September, the CDR cell received proposals to restructure the debt of 341 companies, against 466 companies as on September 2012. At present, 31,118 crore worth debt from a total of 64 companies are under finalisation of their restructuring packages.

Iron and steel companies continue to top the list of companies in the corporate debt, with a year-on-year increase of almost 18% in the restructured debt. The amount of debt sought to be restructured by the iron and steel companies stood at Rs 44,343 crore from 39 cases. 

On a quarterly basis, the aggregate debt in the CDR cell too increased, as the aggregate debt as on June 2012 was Rs 2,27,021 crore from 63 cases, against Rs 2,45,928 crore as  from 75 cases on September 2012, a rise of around 8%.

Iron and steel industry comprised almost 24% of the total debt in the CDR cell as on September 2012, followed by the infrastructure sector at nearly 10%.

In 2001-2002, the steel sector had gone through a turbulent time, with as much as 15% of banks and financial institutions' non-performing assets coming from this sector, according to an old Crisil report. The CDR had inherited a huge chunk of restructured loans at the time of its formation.

In recent months, several small steel producers have sought debt restructuring due to impaired cash flows and they were reluctant to sanction fresh loans to the sector.

Prior to the economic crisis of 2008, several steel makers had taken huge debt exposure, due to good demand. In addition, the cost of raw materials had shot up in recent months due to the clamp down on iron ore mining in several states. Together with this, the import bill had inflated due to a depreciating rupee. Demand erosion for steel firms serving long products due to the economic slowdown has added to the woes of smaller manufacturers.