 "Lenders take over largest Indian oilfield service provider")
When Franklin Templeton announced an investment of $20.6 million in Shiv-Vani Oil & Gas Exploration Services in 2010, its emerging markets fund manager Mark Mobius had said the global investment firm was impressed with the Delhi-based firm’s capabilities in exploration services. “We are confident that these can be leveraged to assist oil and gas companies around the world,” Mobius, executive chairman at Templeton Asset Management, had said. The confidence was no surprise.
Shiv-Vani, promoted by the Singhee family, was considered to be the largest onshore rig owner-cum-operator with a healthy order book of around Rs 4,000 crore and big names such as Oil & Natural Gas Corporation (ONGC) and Oil India (OIL) as customers. Also, Centre had announced a mega plan to boost onshore hydrocarbon exploration spending in India. Five years since, the company has changed its name to SVOGL Oil Gas and Energy; its yearly profits have turned into losses of Rs 582 crore; annual income has shrunk six times to Rs 207 crore; it has faced a case of service tax evasion of Rs 200 crore from the Central Board of Excise and Customs (CBEC); and — with share price having tumbled to an all-time low of Rs 6.94 — the company is valued at only Rs 35 crore.
No wonder, then, that SVOGL Oil Gas and Energy is among the troubled companies whose management control is being taken over by banks to recover loans worth Rs 18,000 crore through the strategic debt restructuring (SDR) scheme initiated by the Reserve Bank of India (RBI) last June. Under the scheme, a consortium of lenders converts a part of their loan given to a troubled company into equity with the consortium owning at least 51-per cent stake.
Shiv-Vani, promoted by the Singhee family, was considered to be the largest onshore rig owner-cum-operator with a healthy order book of around Rs 4,000 crore and big names such as Oil & Natural Gas Corporation (ONGC) and Oil India (OIL) as customers. Also, Centre had announced a mega plan to boost onshore hydrocarbon exploration spending in India. Five years since, the company has changed its name to SVOGL Oil Gas and Energy; its yearly profits have turned into losses of Rs 582 crore; annual income has shrunk six times to Rs 207 crore; it has faced a case of service tax evasion of Rs 200 crore from the Central Board of Excise and Customs (CBEC); and — with share price having tumbled to an all-time low of Rs 6.94 — the company is valued at only Rs 35 crore.
No wonder, then, that SVOGL Oil Gas and Energy is among the troubled companies whose management control is being taken over by banks to recover loans worth Rs 18,000 crore through the strategic debt restructuring (SDR) scheme initiated by the Reserve Bank of India (RBI) last June. Under the scheme, a consortium of lenders converts a part of their loan given to a troubled company into equity with the consortium owning at least 51-per cent stake.
The scheme provides banks relaxation from RBI rules for 18 months as the restructured loans are not treated as non-performing assets (NPAs) and banks have to make low provisions of five per cent in most cases. This enables banks to report lower NPAs and higher profits for 18 months.
A company executive had earlier told Business Standard the firm had opted for expansion through debt as it operated in a capital intensive industry. Despite good profitability, most of the revenue was spent in servicing this debt. When the CBEC in 2013 registered a case of service tax evasion of Rs 200 crore, the company agreed to the liability, but cited ‘financial constraints’ for non-payment.
An earlier corporate debt restructuring (CDR) scheme of the company was approved in January 2014 and had been under implementation. “However, the company could not show progress during the period, as oil majors had not come with major tenders during this period. Now, ONGC and OIL have come up with major tenders and we are hopeful that all the deployable assets will be engaged,” SVOGL said in its annual report for 2014-15. It had in October 2015 informed the exchanges about SDR and increased authorised capital from Rs 230 crore to Rs 600 crore.
An SVOGL investor said the board of the company had passed the resolution for SDR under which lenders — the largest being ICICI Bank — would convert Rs 352.7 crore into 352 million shares of Rs 10 each. This amount represents the funded interest term loan or the defaulted overdue amount. After restructuring, the shareholding of banks would increase from 39.85 per cent to 82.57 per cent, while the promoter shareholding would come down from 34.88 per cent to 11.31 per cent. The Joint Lenders’ Forum (JLF) and lenders are expected to divest their holdings in the equity of the company in favour of a ‘new promoter’. The performance of SVOGL has been reviewed several times by the JLF and the firm has not been performing according to the projections of the earlier CDR package. It has not been able to achieve certain critical milestones stipulated. SVOGL’s account was reviewed at the JLF meeting held in July 2015 where it was informed the company has reported revenue of only Rs 18 crore with negative earnings before interest, taxes, depreciation and amortisation in the first quarter of FY16. Also, only four out of its 17 major rigs are in operation.
So, is the SDR scheme a solution for the troubled company? According to Religare Securities, the scheme increases risk by postponing NPAs. “This scheme is in no way a cure-all for banks’ deteriorating asset health; it exacerbates the risk by deferring an estimated Rs 1.5 lakh crore of NPA formation from 2015-16/2016-17 to later years,” Religare said.
An earlier corporate debt restructuring (CDR) scheme of the company was approved in January 2014 and had been under implementation. “However, the company could not show progress during the period, as oil majors had not come with major tenders during this period. Now, ONGC and OIL have come up with major tenders and we are hopeful that all the deployable assets will be engaged,” SVOGL said in its annual report for 2014-15. It had in October 2015 informed the exchanges about SDR and increased authorised capital from Rs 230 crore to Rs 600 crore.
An SVOGL investor said the board of the company had passed the resolution for SDR under which lenders — the largest being ICICI Bank — would convert Rs 352.7 crore into 352 million shares of Rs 10 each. This amount represents the funded interest term loan or the defaulted overdue amount. After restructuring, the shareholding of banks would increase from 39.85 per cent to 82.57 per cent, while the promoter shareholding would come down from 34.88 per cent to 11.31 per cent. The Joint Lenders’ Forum (JLF) and lenders are expected to divest their holdings in the equity of the company in favour of a ‘new promoter’. The performance of SVOGL has been reviewed several times by the JLF and the firm has not been performing according to the projections of the earlier CDR package. It has not been able to achieve certain critical milestones stipulated. SVOGL’s account was reviewed at the JLF meeting held in July 2015 where it was informed the company has reported revenue of only Rs 18 crore with negative earnings before interest, taxes, depreciation and amortisation in the first quarter of FY16. Also, only four out of its 17 major rigs are in operation.
So, is the SDR scheme a solution for the troubled company? According to Religare Securities, the scheme increases risk by postponing NPAs. “This scheme is in no way a cure-all for banks’ deteriorating asset health; it exacerbates the risk by deferring an estimated Rs 1.5 lakh crore of NPA formation from 2015-16/2016-17 to later years,” Religare said.
