Restructured debt adds zing to scrips

Stocks of 30 firms appreciate over 100% after restructuring.

Shares of companies that have restructured themselves have turned out to be big winners on the bourses, beating the indices by a huge margin.

A Business Standard Research Bureau study shows that of the 40 companies that have gone in for restructuring in the last two years and for which data are available, as many as 30 have seen their stocks appreciate over 100 per cent.

Take, for instance, IDBI. Following the Rs 9,000-crore debt recast package announced in the 2004-05 Budget, the company's stock shot up from around Rs 35-40 in July to Rs 90 at the close of trading on Friday.

The south-based MRPL, too, was burdened by high-cost debt, resulting in the company accumulating losses of Rs 1,185 crore. But after its takeover by ONGC, and the subsequent restructuring of its debt of Rs 2,380 crore, the company's stock took off. From the rock-bottom levels of Rs 2-4 in 2002, it climbed to around Rs 70 in January 2004.

Again, Arvind Mills was reeling under the twin onslaught of a steep decline in denim prices and a hefty debt burden. The company posted a net loss of Rs 500 crore in the 18 months ended September 2001. The stock plummeted to an all-time low of Rs 4, even as company itself went into the red to the tune of Rs 631 crore.

But thanks to a strong resurgence in denim prices and a stiff dose of debt restructuring, during which it rejigged its Rs 1,050 crore debt, Arvind Mills was able to turn the corner, posting net profits in the next three years. The company's share shot up from Rs 4 in 2001 and is trading at around Rs 80 now, translating into returns of 1,900 per cent.

Steel stocks have posted hefty gains after companies in the sector went in for debt restructuring. The Essar Steel stock has appreciated 10 times from its three-year low of Rs 3. Similarly, Uttam Steel has gained 1,350 per cent in 30 months, and the Ispat Industries scrip has shot up 2,100 per cent in three years.

GSFC, which went in for a comprehensive debt restructuring under the Reserve Bank of India's corporate debt restructuring mechanism, saved Rs 38.62 crore in interest cost in 2003-04.

The company made a sharp turnaround that year, posting a net profit of Rs 45.03 crore, against a net loss of Rs 213.13 crore in the previous year.

 

The Sheen is back (A representative sample of companies that gained from debt restructuring)
Company Name	Date *	Price**	Current Close	% change
Uttam Steel	21 Dec, 01	2.75	27.85	912.73
Paushak	27 Jan, 03	3.50	29.20	734.29
Ceekay Daikin	10 Mar, 03	6.05	32.95	444.63
Star Paper	31 July, 02	7.00	37.55	436.43
Jain Irrigation	5 Mar, 02	19.70	97.80	396.45
Dhampur Sugar	8 May, 03	10.05	44.70	344.78
SIEL	29 Jan, 03	3.80	12.99	241.84
Ispat Inds	23 Mar, 01	4.00	12.45	211.25
Sakthi Sugars	20 Jun, 03	9.93	30.40	206.44
Jindal Vijay	20 Jul, 02	4.50	11.90	164.44
India Cements	29 Jan, 03	16.50	42.55	157.88
* Date of board meeting for debt restructuring ** Stock price on the day of board meeting