PNB may take over firms to recover debt

Punjab National Bank (PNB), the country's fourth-largest public sector bank (PSB) by assets, could take control of some of the country's most heavily indebted steel companies and sell them on as part of a restructuring backed by New Delhi, bank officials said.

PNB, a quarter of whose $4-billion portfolio of steel loans is stressed, is considering taking charge of some companies over the next two years, changing their management and then selling stakes, Executive Director K V Brahmaji Rao said. The bank also said it has reported to the Reserve Bank of India (RBI) 400 "wilful defaulters", and plans to sell non-performing assets worth Rs 2,600-3,000 crore to asset reconstruction companies in the current financial year. Gauri Shankar, the bank's executive director (with additional charge of MD and CEO) told PTI the bank has identified corporate accounts and work is underway for their strategic debt restructuring according to RBI guidelines.

Among steel companies, debt-heavy Electrosteel Steels Ltd said on Monday its lenders would restructure its loans, while Bhushan Steel is another big borrower. Nittin Johari, finance head of Bhushan Steel which recently restructured its $5-billion debt, said he was not aware of any plans by lenders to seek control of any company.

"Let me tell you, four-five companies' accounts (stressed assets), we have already identified. Work is on for strategic debt restructuring, which we are going to do as per RBI guidelines," he told PTI. "The fresh restructuring done during the first quarter is just Rs 676 crores in 22 accounts."

The bank is also talking to its lending partners about carrying out debt-for-equity swaps, which would dilute the stakes of existing shareholders and give creditors majority ownership, but nothing has been finalised.

"We are getting feelers from some local investors who are interested to buy stakes in these companies," Rao told Reuters on Tuesday, declining to name the borrowers or the interested parties.

The finance ministry is considering a rescue package for steel companies, including hiking the 10 per cent import duty and injecting funds into companies deemed viable, a senior ministry source said.

A senior steel ministry official said raising the import duty was a priority.