Banks weigh a Zoom bailout

SBI Cap to study viability of debt restructuring, will submit report in a month.

Banks have decided to conduct a viability study to restructure the debt of troubled engineering, procurement and construction firm Zoom Developers.

SBI Capital will carry out the study and submit its report in one month. Based on the report, banks will decide on whether a restructuring exercise can be carried out to give the firm one last opportunity for revival. A restructuring package will only be implemented if two-thirds of the banks in the consortium and lenders of 75 per cent of the debt agree.

Mumbai-based Zoom Developers’ projects are mostly overseas, particularly in the US, Canada and Europe. The company undertakes business and project development work involving process plants, industrial and engineering projects and energy, environment and infrastructure projects. A consortium of 27 banks — led by Punjab National Bank — have an exposure of around Rs 2,700 crore in the company, most of which has been classified as non-performing. The banks have largely provided for their exposure already and the case was referred for corporate debt restructuring in the fourth quarter of last year.

Punjab National Bank has an exposure of Rs 450 crore, of which nearly Rs 300 crore was considered non-performing assets by the bank in the first quarter of the current financial year.

One chief executive of a public sector bank said lenders met last week to review the case. SBI Capital, the investment banking arm of State Bank of India, is involved in hammering out a restructuring package. It is examining the viability of the company’s business model. The restructuring would involve firming up fresh working capital lines for the beleaguered company, bankers said.

As one of the options, lenders are looking to rope in a partner to manage the affairs of the company. Lenders to the company will take a final position and meet again next month to chart out a future course to ensure their balance sheets take the lightest hit.

One senior bank executive said RBI is still examining the Zoom Developers case. Bankers had also referred the matter to the banking regulator for alleged violation of the Foreign Exchange Management Act.

Some bankers are, however, not very hopeful about a positive finding of the viability report. “The management of the company is unable to provide any data. The business model of the company is not that convincing either,” said a bank executive attended the meeting.

The Central Bureau of Investigations has also begun preliminary examination of allegations of banking fraud on loans disbursed to Zoom Developers and the agency has questioned banks on the borrower. There is also a question about the use of funds. CBI is acting on a complaint made to the government and the finance ministry.

In spite of best efforts, the company could not be reached.

Little-known promoters
While awareness about the project management company has literally zoomed, very little is known about the people running the show at Mumbai-based Zoom Developers. Set up as a closely-held company in 1991, it is the flagship of the Zoom Group. The company is managed by Vijay Choudhary and father-in-law B L Kejriwal.

The company website describes Choudhary as group chief executive. With a commerce background, he has more than 20 years’ experience and global exposure to diverse businesses. Zoom Developers’ business interests span engineering and project management services, development of industrial and infrastructure projects, information technology, telecom and business process outsourcing.