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Hyderabad-based infrastructure company Soma Enterprise Ltd, which has a debt burden of around Rs 5,000 crore, is heading for corporate debt restructuring (CDR), sources say.
The highway developer, which also has an engineering, procurement and construction (EPC) division, has been referred to the CDR cell by one of its bankers, State Bank of India, the country’s largest lender. A senior public sector executive said the company was facing liquidity stress due to delays in payments for contract work.
Under CDR, banks typically increase the repayment period of loans to stressed borrowers, offer a moratorium and reduce lending rates. Ankineedu Maganti, managing director of Soma, refused to offer any comment on the development.
As many as 23 banks, including UCO Bank, Axis Bank, Andhra Bank, L&T Infrastructure Finance and ING Vysya Bank, have lent to the company.
The company had an EPC order book of Rs 16,170 crore as on March 31, 2012. Soma is one of the many infrastructure companies facing liquidity crisis.
Especially, EPC companies have come under pressure as orders reduced, payments are delayed and working capital cycles got extended, forcing these companies to borrow more on the short term as well.
“Most companies in the EPC segment have been affected by the slowdown in infrastructure in the last two years. The company (Soma), though big, has seen pressure on its finances,” said an executive with a Mumbai-based large state-owned bank, who also did not want to be named.
In February last year, rating agency Icra had put Soma in the lowest grade—‘D’. The agency said the rating revision was primarily on account of stretched liquidity position, which was reflected in delays in meeting debt obligations over the previous six months.
“The ratings are constrained by relatively high gearing of the company, significant committed investment required in BOT (build–operate–transfer) special purpose vehicles, and delays in completion of the Panipat-Jalandhar toll road project,” Icra said.
The company has been into highway development, and has seen a series of private equity (PE) investments. The UK-based 3i Private Equity, which had an infrastructure fund, had invested $101 million (Rs 560 crore today) to pick up a minority stake in Soma in November 2007. In 2011, the company saw another round of PE investment from JPMorgan Asset Management, which invested $110 million.
Apart from EPC, the company develops road projects on the BOT basis. It has completed the construction of four such projects and four more are under way, according to the company website.
Soma is engaged in the construction of infrastructure projects across sectors like hydel power, irrigation, transportation, and transmission lines, in addition to urban infrastructure and real estate.
