Banks on takeover drive of defaulting companies

Gammon, IVRCL latest to join strategic debt restructuring list

Banks are taking over companies under the strategic debt restructuring (SDR) scheme and forcing defaulters to sell assets.

On November 30, banks announced the conversion of Rs 15,000 crore of Gammon India’s loans into equity. On the same day, they informed Hyderabad-based road developer IVRCL that they were converting Rs 7,500 crore of loans into equity.

On Thursday, Electrosteel Steels said its board of directors would meet on December 8 to take on record an SDR package. The Kolkata-based Electrosteel Steels owes banks Rs  9,500 crore.

Banks have also invoked SDR against Lanco Teesta Hydro Power, VISA Steel, Jyoti Structures, Monnet Ispat and Energy.

The SDR scheme was cleared by the Reserve Bank of India in June. The scheme was introduced because banks felt the corporate debt restructuring (CDR) scheme failed to help them recover their money. The CDR cell had approved restructuring loans worth Rs 4 lakh crore till March this year. Under the SDR scheme, banks convert loans into equity and can change the management of the company.

“Banks are not in a mood to listen to borrowers. That is why we are selling our assets in India and abroad to avoid the SDR scheme,” said the promoter of a large corporate group who did not wish to be named. With SDR as a stick,  banks have also put defaulters on notice that if they are unable repay loans by selling assets then they will do it for them. This has expedited the sale of assets by many debt-laden groups.

Essar Steel announced on November 8 it had appointed SBI Caps and ICICI Securities to sell stakes in the company. This was apart from its own plans to sell assets worth Rs 11,200 crore by March 2016.  “The promoters will infuse another Rs 1,500 crore into the company in 2015-16," Firdose Vandrevala, executive vice-chairman, Essar Steel, had said in a recent interview.

Soon after selling its two telecom circles to Idea Cellular, Videocon Industries said it would sell telecom assets, including spectrum, worth Rs 14,000 crore to bring down its Rs  39,000 crore net debt.

The Anil Ambani-owned Reliance Infrastructure said it would sell its cement assets and 11 road projects to cut its  Rs 25,000 crore debt. On Friday, another Ambani company Reliance Communications announced its plans to sell its telecom tower company to private equity firms, Tillman Global and TPG to reduce its debt.   Hyderabad based GMR and GVK are also taking steps to raise funds. On Friday, GMR announced that it is raising $300 million by way of a foreign currency convertible bond.  Similarly, GVK is planning to get an investor for its airport arm. Most debt-heavy companies have been battered on the stock exchanges as investors fear asset sales will pull down future sales and profits.

Banks have also been aggressive with Vijay Mallya, chairman of the UB Group who defaulted on Rs  7,000 crore of loans taken by Kingfisher Airlines and have declared him as a defaulter.