PNB hopes its 5 steel a/cs with NCLT to be resolved in time

Punjab National Bank, which has exposure to nine accounts under insolvency process, hopes that the five steel accounts in the list will be resolved within the stipulated time-frame as there is good interest from potential bidders for those assets.
In June, the Reserve Bank had asked banks to refer 12 large stressed accounts--Bhushan Steel, Essar Steel, Bhushan Power & Steel, Monnet Ispat, Electrosteel Steels, Lanco Infra, Alok Industries, Amtek Auto, Era Infra, Jypaee Infratech, ABG Shipyard and Jyoti Structures--to the NCLT for insolvency. Of these, PNB has exposure to nine.
"Of the nine accounts we have exposure to, we expect five steel accounts will get resolved (outside NCLT). We're getting a number of bidders for each of them. So, the chances are that they will be resolved," MD and CEO Sunil Mehta told reporters here today.

Of the second list of 28 stressed accounts, which RBI had asked banks to resolve by December 13, the second largest state-run lender has exposure of Rs 6,500 crore in 20 accounts, he said.
The RBI has asked banks to resolve these accounts by December 13, failing which these accounts will have to be referred to National Company Law Tribunla by December 31.
Mehta, who was here for a post-earnings analyst meet, sees only 30 per cent of the stressed accounts from these 20 accounts, will be resolved before December 13.

"I don't expect more than 30 per cent will get resolved before December 13 and the rest may have to go to the NCLT. But, even if I consider that 100 per cent won't be resolved, my incremental provisioning requirement is only Rs 800 crore and I've got adequate profit cushions to do that," he said.

Asked whether PNB is concerned over the existing promoters of the defaulting companies that are facing insolvency proceedings and are up for sale, bidding for their businesses, he said promoters cannot be denied from participating in the bidding as per the law.
Mehta said if the promoter along with any other investor is able to give highest bid, the lenders will give preference to that.
"Suppose, we have Rs 40,000 crore exposure to a unit and the liquidation value is pegged at Rs 10,000 crore, and if we get bids from others at the liquidation value, but the promoter brings in new investors and offers Rs 25,000 crore, then, as a lender we'll definitely go with the highest bidder. We'll go by net present value," Mehta explained.

Though he was quick to add that no creditor would like to continue with the same promoter, he said participation of the promoter is equally necessary in maintaining the asset during the intervening period and also to create a threat to the bidders that if they did not bid properly then valuation of the asset can be affected.
Executive director K V Brahmaji Rao said no defaulters or existing borrower is capable of bidding alone today.
"He will be getting some joint venture partner or an investor/s and only then he will be able to bid. I don't think a defaulter bids just like others," Rao said.

Mehta further said the Insolvency and Bankruptcy Code has fast-tracked the decision-making processes, given legal immunity to bankers for their decision and has also put pressure on promoters to come out with a resolution plan as otherwise they can lose control.