Yash Birla firm faces Rs 1,000-cr loan recall

Banks are likely to recall their loans from Birla Surya Ltd, part of the Yash Birla group, which has defaulted on around Rs 1,000 crore of debt payment.

The loans, now classified as non-performing assets (NPA) by the lenders, were taken some years before to fund the company’s new projects in the infrastructure sector.

One of the lenders, United Bank of India (UBI), a Kolkata-based public sector lender, recently issued a public notice that the company, even after repeated reminders, had not liquidated the liabilities. And, that the bank reserved the right to initiate legal action to recover its money. UBI has a Rs 70-crore exposure to the company.

After a recall notice is given to a borrower, banks can start the recovery process. Recourse to the Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act and the DRT (Debt Recovery Tribunal) are two routes that lenders can resort to for recovering bad loans.

In early 2011, Birla Surya had announced it would invest Rs 5,400 crore over the next five years, to set up an integrated unit for fabrication of multi-crystalline silicon wafers and manufacturing of solar photovoltaic (SPV) cells. The company had said it would invest Rs 1,493 crore in the first phase to set up a manufacturing unit with 60 Megawatt (Mw) capacity for multi crystalline silicon wafers and a fabrication unit of 125 Mw capacity. The company had borrowed about Rs 1,000 crore from 11 lenders for the first phase. The loan had a tenure of 10 years, with an average interest rate of 14.5 per cent.

The SPV project, at Rajewadi village in Satara district of Maharashtra, was facing delays as the financial closure was not complete, with a major portion of the equity not tied-up. The project was also yet to receive a Pollution Control Board certificate.

Following a rise in NPAs, amid a slowing economy, state-run banks have strengthened their recovery efforts. Finance Minister P Chidambaram had asked for toughness on corporate defaulters, in a meeting with public sector bank chiefs earlier this month. “We cannot have an affluent promoter and a sick company,” the minister had said last month, after a meeting with the chief executives of these banks.

Public sector banks have been asked to frame a board- approved recovery policy and to constitute a board-level committee for monitoring of recovery. The top 300 NPA accounts are to be regularly reviewed by the management committee of the board.