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All is not well with India Inc. The ripples the global and domestic economic slowdown is beginning to affect small and mid-sized companies in the country.
This is borne out by the fact that the number of companies that have come up for debt recast with a cell promoted by all banks has almost doubled to 70 in the first six months of the current financial year as compared with 36 in the year ago period.
The aggregate debt exposure of the 70 companies is 54 per cent higher at about Rs 39,700 crore in the reporting period compared with the aggregate debt exposure of the 36 companies at about Rs 25,700 crore in the year-ago period.
Forty eight companies with debt up to Rs 500 crore, 12 firms with debt over Rs 500 crore and up to Rs 1,000 crore, and 10 with debt over Rs 1,000 crore have applied with the Corporate Debt Restructuring (CDR) Cell.
The CDR Cell was floated by banks in 2001 to turnaround the fortunes of companies facing financial difficulties due to factors beyond their control and also due to certain internal reasons.
Under restructuring lenders, among others, reduce the interest rate, reschedule repayments, and convert working capital irregularity into working capital term loan.
In the reporting period, the average debt size per company that has come up for restructuring was lower at Rs 567 crore, against Rs 714 crore in the year-ago period.
According to bankers, besides the usual cases of textile and sugar manufacturing units, increasingly, mid-sized iron & steel units, hotels and engineering, procurement and construction (EPC) contractors the infrastructure space are coming up for restructuring.
“Mid-sized iron and steel units are facing the heat as the mines they procure raw materials (iron ore and coal) from have been mired in environmental problems. Importing raw materials is a costly proposition with implications for profitability,” said a senior public sector bank official.
Hotels are facing oversupply, thereby impacting room rentals. EPC contractors are facing environment clearance and land acquisition problems.
Among the bigger cases that have been admitted/referred to the CDR Cell in the first half are: Deccan Chronicle Holdings (banks’ debt exposure: Rs 4,000 crore), Indu Project (Rs 2,800 crore), Visa Steel (Rs 2,500 crore), Varun Industries (Rs 1,750 crore), Ind Swift Ltd (Rs 1,700 crore), Konaseema Gas Power Ltd (Rs 1,470 crore), and ICOMM Tele (Rs 1,360 crore).
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