CG: Source says govt expects PSU banks to recover 2 trln rupees FY20

22 March 2019: As the resolution of cases and recovery under Insolvency and Bankruptcy Code gain pace, the government expects public sector banks to recover close to 2 trln rupees in 2019-20 (Apr-Mar), an improvement from the 1.8-trln-rupee target set for the current financial year, a senior finance ministry official said.

“In the current financial year, state-owned banks have performed well to meet the recovery target of 1.8 trln rupees. We expect that banks will be able to recover close to 2 trln rupees in 2019-20 (Apr-Mar). However, a formal recovery target for these banks is yet to be decided,” the official told Cogencis.

While public sector banks have recovered close to 1.3 trln rupees by mid-March, meeting this year’s target depends on the resolution of Essar Steel insolvency case before Mar 31, Cogencis had earlier reported.

Although ArcelorMittal India’s bid has been upheld by the tribunals, how the 420-bln-rupee bid sum will be distributed among the lenders is yet to be decided by the appellate tribunal. This has raised worries about the recovery from this case being pushed to the next financial year.

On Monday, the government met the senior management of public sector banks via video conferencing to take stock of the recovery target for 2018-19. 

The meeting discussed the recoveries made by public sector banks through debt recovery tribunals and SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act), along with a presentation on the Insolvency and Bankruptcy Code by the corporate affairs ministry. 

According to a recent report released by the Boston Consulting Group and Indian Banks’ Association, public sector banks have recovered a total of 2.87 trln rupees between April 2014 and December 2018. 

The report said that public sector banks have recovered close to 800 bln rupees from cases resolved under the Insolvency and Bankruptcy Code.

Cogenics reported

BS: IDBI Bank, IOB dissent against Srei-backed resolution plan for DCHL

22 March 2019: IDBI Bank and Indian Overseas Bank (IOB) have dissented from the resolution plan for Deccan Chronicle Holdings (DCHL), which was presented by Vision India Fund and backed by Kolkata-based Srei Alternative Investment Managers.

Financial creditors have an exposure of close to Rs 8,000 crore to DCHL. The committee of creditors had earlier approved Vision India Fund’s resolution plan of about Rs 1,000 crore with about 82 per cent voting in favour. 

This was the second plan by the Srei-backed fund. The first plan was rejected by the bankers. Earlier, Vision India Fund had put in a bid for Rs 800 crore, but it was for a staggered payment over five years. 

The two banks have filed an application against the resolution plan at the National Company Law Tribunal (NCLT), Hyderabad. IDBI Bank has raised objections that it is being unfairly treated as some banks will have disproportionately higher amounts under the plan.

IOB, too, has raised objection against the payout through a mix of cash and non-core assets, said sources. DCHL’s insolvency resolution professional Mamta Binani refused to comment on the issue. Earlier, Binani had told the NCLT that DCHL was facing serious financial crisis and the salaries of the employees was due for several months.

The admitted claims of financial creditors at DHCL is close to Rs 8,181 crore, while that of operational creditors is nearly Rs 154 crore as on November 2018. This apart, Srei’s admitted claims is about Rs 297 crore, according to information available at the website of Deccan Chronicle.

In February 2016, Srei Alternative Investment Managers had announced the launch of its Rs 2,000 crore India Vision Fund, which it said would invest in debt/mezzanine instruments of companies having future opportunities.

Canara Bank, one of the major lenders to the media house, had dragged DCHL into NCLT in May 2017.

The Business Standard reported

CNBCTV18: New twist in Ericsson-RCom feud: Swedish telecom firm may be asked to refund Rs 576 crore

22 March 2019: After initial celebrations on receipt of settlement amount from Reliance Communications (RCom), there could be fresh worries for Swedish telecom equipment supplier Ericsson in the form of potential demand for refunding from the Anil Ambani company.

The Supreme Court (SC) on February 20 had directed RCom to pay Rs 576 crore to Ericsson by March 19 or risk letting the Anil Ambani, the chairman of the Anil Dhirubhai Ambani Group, face a three-month jail term.

Subsequently, RCom had moved the National Company Law Appellate Tribunal (NCLAT) seeking to utilise income tax refunds of Rs 260 crore, lying with State Bank of India (SBI), for repaying Ericsson.

Over the course of the NCLAT hearing, on March 13, the chairman of the appellate tribunal, J Mukhopadhyay, had observed that even if RCom pays the settlement sum to Ericsson, if Insolvency and Bankruptcy Code (IBC) proceedings are allowed by NCLAT, the amount will have to be refunded by Ericsson to RCom.

The appellate tribunal had further observed that the settlement amount of Rs 576 crore would be subject to the IBC proceedings if triggered. The NCLAT had even suggested to Ericsson that they should consider moving SC for a clarification.

And that without the SC clarification, the appellate tribunal would direct Ericsson to return the settlement sum of Rs 576 crore, if it allowed Corporate Insolvency and Resolution Process (CIRP) against RCom.

These observations appear to stem from the NCLAT’s interim order of May 30, 2018. In the interim order, in para 11 of the interim order, the NCLAT states, “Payment of Rs 550 crore to ‘Operational Creditor’ (read Ericsson) shall be subject to the decision of these appeals.”

The order further reads, “If the appeals are dismissed, the ‘Operational Creditor’ (Read Ericsson) will pay back the amount to the ‘Corporate Debtors’ (Read RCom).”

Ericsson, however, seems unfazed by NCLAT’s observations are confident that any direction by the NCLAT for returning the Rs 576 crore settlement sum will be untenable.

Senior advocate, Anil Kher, who appeared on behalf of Ericsson in NCLAT said, “Settlement, as proposed by RCom and authorised by SC, has been complied with and payment has been received. Appellate Tribunal has no power to seek a refund after SC’s approval of payment of the settlement sum of 576 crore.”

Lenders are expected to watch these developments closely after Ericsson, which is at best an Operation Creditor, had trumped the financial creditors in securing Rs 576 crore of its dues even before the lenders.

On March 15, NCLAT had rejected the RCom plea seeking to use income tax refunds of Rs 260 crore, lying with SBI, for repaying Ericsson. On March 18, RCom decided against challenging the NCLAT order in SC. And by late evening, RCom issued a statement confirming that Rs 458.77 crore had been deposited with Ericsson.

Already, Rs 118 crore had already been paid to Ericsson, earlier. The SC prescribed deadline for payment of the settlement sum of Rs 576 crore was March 19. Failure to pay would have meant a three-month jail term for Anil Ambani.

In the same statement, confirming the payment to Ericsson, Anil Ambani also expressed his gratitude to Mukesh Ambani and Nita Ambani for “standing by” him in “these trying times” and for “extending this timely support”.

Meanwhile, in another statement on March 18, RCom has confirmed that they will be looking for a successful resolution through the CIRP under the IBC.

CNBCTV18 reported

FE: NPA crisis: PSU banks’ recoveries less than write-offs in October-December this fiscal

21 March 2019: Cash recoveries made by 20 public-sector banks (PSBs) in the December quarter of FY19 were lower than the amount of loans written off by them during the quarter, data compiled by FE show.

The clutch of banks together recovered Rs 35,058 crore during Q3 while writing off loans worth Rs 44,998 crore over the same period. This was even as recoveries rose 37% over Q3FY18 and 15% over Q2FY19. The fact that there were no large non-performing assets (NPAs) resolved through the insolvency route during the December quarter restricted banks’ recoveries.

Fifteen of the 20 banks recovered less than they wrote off in the third quarter, with the difference being the largest for Central Bank of India, which recovered Rs 465 crore and wrote off loans worth Rs 4,069 crore in Q3. The March quarter may turn out to be a better one for Central Bank as it hopes to recover around Rs 2,500 crore from the sale of its exposures to Essar Steel (Rs 424 crore), Bhushan Power & Steel (Rs 1,550 crore), Alok Industries (Rs 1,251 crore), Bombay Rayon Fashions (Rs 96 crore) and Burnpur Cement (Rs 51 crore).

With Rs 221 crore recovered against write-offs worth Rs 1,211 crore, United Bank of India also saw a wide mismatch between the two categories.

Both Central Bank and United Bank remain under the Reserve Bank of India’s (RBI) prompt corrective action (PCA) framework.

On the other hand, Andhra Bank recovered Rs 503 crore, significantly more than the Rs 55 crore it wrote-off during the December quarter. IDBI Bank – also under PCA restrictions – recovered Rs 3,586 crore in the quarter. The value of its written-off accounts stood at Rs 562 crore.

The government had set a recovery target of Rs 1.8 lakh crore for PSBs in FY19. Senior officials at the finance ministry and public-sector bankers held a meeting on Monday to take stock of recoveries from stressed assets, mainly through the Insolvency and Bankruptcy Code (IBC).

Resolution in the Essar Steel and Alok Industries accounts in the March quarter may help PSBs meet their target for the full year.

The other significant channel banks have been turning to for recoveries is sales to asset reconstruction companies (ARCs). Bad-loan accounts put up for sale by banks so far in the March quarter have risen to over Rs 27,700 crore as lenders rush to make cash recoveries ahead of the close of the financial year 2018-19. In their anxiety to close out deals, they have been willing to take fairly large haircuts in exchange for full-cash payments.

The Financial Express reported

DNA: Matix promoters race against time to prevent bankruptcy

22 March 2019: Time is running out for Matix Fertilizers and Chemicals, country’s maiden coal bed methane gas-based fertilizer plant set up by Nishant Kanodia, son-in-law of Ravi Ruia.

The promoters have asked its bankers for time as repayments can start only after the plant becomes operational following beginning of supply of CBM gas from Essar Oil and Gas Exploration’s fields in Ranigunj.

Matix promoters would be able to arrange fresh loans to repay old debt only after the plant starts operations with the resumption in the supply of the fuel, the company has told the insolvency court.

The 3 million-tonne-a-year plant has defaulted on its Rs 4,305 crore debt burden as it turned idle due to want of fuel, and its banker IDBI Bank has dragged it to the insolvency court.

Expressing helplessness, Matix has now told the Kolkata-bench of National Company Law Tribunal that “every effort is being made for making the company functional and upon operation of the company it can manage funds from other financiers”.

GAIL officials had earlier told DNA Money that its pipeline, part of the Pradhan Mantri Urja Ganga pipeline that would carry the gas from Essar Oil and Gas Exploration’s CBM fields to Matix’s plant, is expected to get commissioned by July.

The CBM production reportedly fell short of Matix’s requirements while Essar officials had maintained that Matix’s own production wasn’t stabilised and the company had even supplied CBM for pre-commissioning activities of Matix.

In 2018 the Ruias controlled Essar Oil and Gas Exploration signed pact with GAIL for selling its coal bed methane gas for a locked in price for assured offtake for 15 years.

But Matix’s plant couldn’t be run as “one of the main ingredients like gas supply was not resumed by the supplier due to certain pending sanction of statutory authorities and every effort is being taken for making the company functional”, Matix has told the court.

Rating agency CARE downgraded Matix to default category has the company failed to commercially commence production due to non-availability of feedstock about two years back.

STARVED OF FUEL

  • Matix promoters say they would be able to arrange fresh loans to repay old debt only after the plant starts operations with resumption of fuel supply  
  • The 3 million-tonne-a-year plant has defaulted on its Rs 4,305 crore debt burden as it turned idle due to want of fuel

The DNA reported

DNA: Lenders drag road developers to NCLT, push for asset sales

22 March 2019: Sale of road assets driven by lenders is turning out to be a new trend in the Indian road sector.

Around 15% of the total operational build-operate-transfer (BOT) road assets are struggling due to mismatch in cash flows, leading to issues with the servicing of debt, according to Rajeshwar Burla, assistant vice-president – associate head, Icra Ratings.

In the last few months, lenders have taken some road asset special purpose vehicles to National Company Law Tribunal (NCLT), and in certain cases they have initiated process for sales to recover money from the defaulting road developers.

Recently, Oriental Bank of Commerce had pressed for insolvency proceedings against L&T Halol Shamlaji Tollway Ltd, a special purpose vehicle of L&T Infrastructure Development Projects at NCLT’s Chennai Bench.

Earlier this month, L&T Halol Shamlaji Tollway informed the NCLT that its debt has been restructured and is being timely serviced. An order is awaited in this case.

“Asset sale transactions in the recent past are also driven by lenders. In 2018, three assets were sold through substitution route. Of these, one was initiated by the lenders (classified as non-performing asset) as a distressed asset sale and two were initiated by the concessionaire through harmonious substitution,” Burla said.

Some of the assets on the block currently are available through substitution at attractive valuations, and hence investors prefer this route.

According to an industry player, a few assets or special purpose vehicles are likely to be put on the block in the near future as several road projects are under stress with mismatch in revenues and debt payments.

“The total quantum of loans not getting serviced and stressed plants in the power sector is much higher. But the public sector banks are under pressure due to multiple factors and in different sectors. For such lenders, it is important to initiate proceedings against the defaulting SPV or concessionaire,” said a Mumbai-based analyst.

On the other hand, some developers with a weak credit profile, have disposed of their assets at a loss as liquidity took precedence over revenues.

BUMPY PATH

  • Around 15% of the total operational build-operate-transfer road assets are struggling due to mismatch in cash flows  
  • In the last few months, lenders have taken some road asset special purpose vehicles to National Company Law Tribunal

The DNA reported