News

Stressed steel assets may see lower recovery rates in round 2 of resolutions

PTI Mumbai | Updated on June 20, 2019 Published on June 20, 2019

Even though recovery rates from stressed assets in the steel sector have been higher till now, the same is expected to dip in the next round of resolutions, a report said on Thursday.

Operational and financial creditors have had to take a 58 per cent haircut on underlining dues of Rs 1.7 lakh crore in the 94 companies resolved through the Insolvency and Bankruptcy Code till March 2019, the research wing of rating agency Crisil said.

Sixteen of the accounts were in the steel sector, where the haircut required was a lower 47 per cent, as compared to the 69 per cent for other sectors.

Within the steel sector, 17 new assets involving outstanding dues of Rs 62,000 crore are coming up, it said. “Next lot with debt outstanding of Rs 62,000 crore could see lower recovery rates,” it said.

Unlike the first wave of debt clean-up, the upcoming resolution cases would largely be smaller assets concentrated in the long integrated (42 per cent of Rs 62,000 crore in six accounts), sponge iron (38 per cent in six accounts), and flat-rerolling space (three accounts, 18 per cent), it added.

Crisil estimates that the flat steel segment’s growth is expected to moderate to 5-5.5 per cent over the next two fiscals, from 7 per cent over the previous two fiscals because of a slowdown in automotive sales and sedate demand for capital goods.

In the long integrated space, even though demand is slated to go up, capacity ramping by established players such as SAIL, RINL and JSPL would hurt stressed players, it said.

For steel intermediaries and sponge iron, demand was expected to moderate to 3-4 per cent growth, while in the flat re-roller segment, large players would command a larger share, it said. The agency added that bidders would not be aggressive in the next round, given the high capacity addition expected to take place.

The steel sector is set to see 28-30 mt capacity addition, apart from ramp-up of under-utilised capacities for accounts resolved in the first list of cases mandated to be resolved through the National Company Law Tribunal.

The agency added that this would ensure that capacity utilisation rates continue to be at a high of over 80 per cent till fiscal 2023-24, which was likely to dent the bidding, it said.

Published on June 20, 2019

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Sincerely,

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.