CDR sees 50% rise in referrals

Banks’ corporate debt restructuring (CDR) cell have over a year seen a nearly 50 per cent rise in aggregate debt sought to be rolled over. The iron and steel sector contributed 24 per cent or nearly half the rise.

As on September, the CDR cell received proposals for restructuring aggregate debt worth Rs 245,928 crore, against Rs 164,294 crore as on September 2011. The respective numbers of companies involved were 466 and 341.

At present, there is Rs 31,118 crore of debt from a total of 64 companies under finalisation for a restructuring package.

Iron and steel companies continue to top the list, with a year-on-year rise of 18 per cent in restructured debt, about Rs 44,340 crore from 39 cases.

On a quarterly basis, aggregate debt in the CDR cell rose; as on June, it was Rs 227,021 crore from 63 cases, against Rs 245,928 crore from 75 cases in September, a rise of eight per cent.

The iron and steel industry comprised 24 per cent of the total in the CDR cell as on September, followed by the infrastructure sector at nearly 10 per cent. In recent months, several small steel producers have sought debt restructuring due to impaired cash flows and a reluctance 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 on iron ore mining in several states.

And, the import bill had inflated due to a depreciating rupee.

Demand erosion for steel firms serving long products due to the economic slowdown have added to the woes of smaller manufacturers.