The Essar group, Jindal Steel and Power, Monnet Ispat, Bhushan Steel and the Avantha group have been asked to close deals by March-end.
Alarmed by the losses of Rs 15,000 crore (Rs 150 billion) per quarter incurred by stressed companies, banks are asking debt-heavy firms to expedite assets sales before March 31.
Bankers said the deadline was necessitated because there was no clarity when deals would close despite announcements made by companies. “There are no indicators that the companies are getting back on track even in the next financial year,” said a banker.
Senior public sector bank executives said pressure had been built over the last few weeks for early resolution but timelines were stretched by demonetisation in the third quarter. Now the focus is back on recovering part of the money from large borrowers before the close of the financial year.
The Essar group, Jindal Steel and Power, Monnet Ispat, Bhushan Steel and the Avantha group have been asked to close deals by March-end.
According to a State Bank of India executive, the Reserve Bank of India is insisting on deleveraging in big-ticket cases. “The cascading effect is a vigorous follow-up with managements for resolution involving asset sales and creating liquidity,” he said asking not to be named.
A Punjab National Bank executive said lenders had entered into special arrangements with steel companies to carve out 10-15 per cent of their revenue for part repayment of dues.
“Many of them have benefitted from the increase in product prices after the government imposed duties on steel imports last year. In three or four cases, our bank has been able to recover over Rs 1,000 crore,” the executive said.
Banks have received an assurance from the Essar group that it will close the sale of its 98 per cent stake in Essar Oil this month, apart from selling a 60 per cent stake in Essar Steel. The group is in talks with Farallon Capital and banks to sell the Essar Steel stake.
Jindal Steel and Power, with debt of Rs 43,000 crore (Rs 430 billion), is in talks with the Adani group to sell its 2,400 mw Chhattisgarh power plant for Rs 10,300 crore (Rs 103 billion), according to bankers.
The JSW group is also in talks to take over Monnet Ispat. It has submitted a bid of Rs 25,000 crore (Rs 250 billion) to banks for the debt-laden Bhushan Steel that involves taking over its Rs 44,477 crore (Rs 444.77 billion) debt at a substantial discount.
Bankers said despite asset sales, the financial position of a few stressed companies had deteriorated, with their combined losses now running at around Rs 15,000 crore per quarter against a small net profit two years ago. “We want to see closure of deals and not just announcements,” said a lender.
According to a Morgan Stanley report, almost 25 per cent of Indian companies listed on the BSE 500 are currently in distress.
Another worry for banks is since the second half of 2016 a significant proportion of the increases in NPAs - four-fifths of the slippages during the second quarter - have come from mid-size companies. This trend is likely to continue.
