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While India Inc and the economy might have begun to move out of the woods, the stress from the slowdown and cost burden continue to trouble lenders.
The very first month (April) of the new financial year saw lenders referring six cases involving exposure worth Rs 7,600 crore to the banks' corporate debt restructuring (CDR) cell.
A public sector bank (PSB) executive said the scale of loan recast was high since three big-ticket cases, including one in thermal power generation, of Corporate Power Ltd (CPL; exposure worth Rs 3,000 crore), were referred to the cell. The other two large cases were of Arch Pharmalabs (Rs 1,800 crore) and Bilcare Ltd (Rs 1,500 crore).
CPL is a special purpose vehicle, incorporated to build, maintain and operate a 1,080-Mw (four units in two phases of 540-Mw each) coal-fired thermal power factory in Jharkhand. CPL is sponsored by the Abhijeet group and its group company, Corporate Ispat Alloys Ltd.
Significant delays in commissioning have led to cost overruns. India Rating downgraded loans to CPL after the management approached the CDR cell with a loan restructuring proposal.
India Rating also downgraded Bilcare's long-term issuer rating to 'IND D' from 'IND BBB+'. The downgrade followed a public notice this month by United Bank of India, classifying Bilcare's exposure as a 'non-performing asset'.
Public sector executives said banks might opt to prepone restructuring which otherwise would have been done in 2014-15. The Reserve Bank has indicated it would prescribe stiff provisioning norms for loan recast from April 2014.
Companies from the construction, power and hospitality sectors might continue to apply for loan restructuring, officials said.
In 2012-13, as many as 129 cases involving debt worth Rs 91,491 crore were referred for debt recast, up from 87 cases with exposure of Rs 67,889 crore.
Problems in fuel linkages for power projects and delays in regulatory and environmental clearances and higher interest rates hit corporate balance sheets, said a top official with a Mumbai-based PSB.
It worked to the benefit of lenders, too. Instead of taking a big hit for bad loans, they had to provide less amounts in restructured debt. Industries with high share in the recast portfolio were iron and steel, infrastructure, textiles, construction and telecom.
