The Hindu Business Line : 8 banks face NPAs of Rs 1,300 cr on PSU arm’s scrap woes

Chennai, July 3 Five public sector banks and three of the private sector are in danger of losing about Rs 1,300 crore, as a loan account of a public sector undertaking, STCL Ltd, has turned non-performing.

The Bangalore-based STCL is a wholly-owned subsidiary of State Trading Corporation. STCL was first set up as Spices Trading Corporation Ltd, but in 2007 it also began trading in metal scrap.

STCL’s woes

STCL buys metal scrap from the international market with a back-to-back sale agreement with Indian companies. Since September last year, when metal prices started falling, STCL got stuck with about 850 containers as Indian buyers refused to lift the stock at the agreed prices.

For purchase of this stock, STCL raised varying amounts from the eight banks, led by Vijaya Bank to which it owes roughly Rs 290 crore. The banks have advanced approximately these amounts: State Bank of India and IDBI Bank Rs 200 crore each, Union Bank and Canara Bank Rs 170 crore each, UCO Bank Rs 150 crore, Axis Bank Rs 125 crore and YES Bank Rs 15 crore.

Top sources among the banks involved confirmed the issue to Business Line, but said they could not comment on individual accounts. The sources said that STCL got into trouble because it did not get the payment guaranteed, in terms of the letters of credit.

Business Line learns that STCL has filed a police complaint against two Indian companies, Future Metals Pvt Ltd and Future Exim Pvt Ltd. These companies are ‘agents’ that sell the commodity on to others. Mr K.C. Ponnana, Managing Director, STCL, told Business Line that he would “leave no stone unturned” and is confident of recovering the company’s dues.

More complications

Normally, in such a situation STCL would sell stocks and realise whatever value possible and repay the banks, but some complications have arisen.

First, it was discovered that the containers that were to have contained copper and nickel scrap actually had steel scrap. This is a huge loss in value. It is understood that STCL has proceeded against the inspection agency concerned — Worldwide Logistics Survey and Inspection.

Second, the buyers to whom the agents were to sell the material have claimed ownership of the consignment on the basis that they have already paid for it. The ownership of the stocks has become a legal issue.

Incurring demurrage

Meanwhile, the containers are lying at the South Korean port of Busan, incurring demurrage. It is learnt that the port authorities have auctioned 300 container loads and appropriated the proceeds against their dues.

Now, according to some bankers, if timely action is not taken, the rest of the cargo may be similarly auctioned, making proof of malfeasance more difficult. They say that either STCL, or its parent STC, should at least pay the Busan authorities the dues and prevent further auction. .

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More Stories on : PSU | Non-Performing Assets | Metals

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