Watch them: Firms fight hard to fix debt mess, but insolvency axe looms

Domestic lenders have launched aggressive steps to start insolvency proceedings against the companies named in the Reserve Bank of India’s second list of defaulters recommended for insolvency proceedings.

While many of the companies named in the second list are making desperate attempts to get their debt restructured, top lenders are preparing to file insolvency proceedings against them before the December 13 deadline in the cases where restructuring is expected to fail, Mint reported on Wednesday quoting a top banker.

Banks have been forced to set aside significant amounts to cover the risk of default, which have dented their bottom lines, and they are under pressure to hasten the debt resolution process, the Mint report suggested.

Latest quarter earnings showed gross non-performing assets (NPAs) across listed banks stood at Rs 6.42 lakh crore at the end of June 2017. New measures for debt resolution may provide some relief to the sector.

Debt-ridden companies such as Videocon Industries, Castex Technologies, Essar Projects, Visa Steel, Jaiprakash Associates, SEL Manufacturing, Soma Enterprises, Orchid Pharma and Uttam Galva Steel figure in RBI’s second list of defaulters.

On a year-to-date basis, the share price of Videocon Industries has tanked 82 per cent to Rs 19 on September 9, 2017 from Rs 104.10 on January 2, 2017. Castex Technologies and Uttam Galva have slipped 28 per cent and 7 per cent, respectively. On the other hand, JP Associates has advanced 189 per cent during the same period.

Ace Investor Rakesh Jhunjhunwala picked up 2.5 crore shares, or 1 per cent stake, in Jaiprakash Associates in the June quarter.

Media reports suggest Videocon Industries has already taken steps to restructure its debt by September to avoid bankruptcy proceeding at the National Company Law Tribunal. The company has an outstanding debt of over Rs 40,000 crore.

Jaiprakash Associates had total debt of Rs 39,000 crore as of March 31, 2017, while Uttam Galva had Rs 6,192 crore.

The NCLT has so far decided more than 650 cases under the Insolvency and Bankruptcy Code.

The NCLT has also admitted a petition of Bank of Baroda against Amrapali Silicon City owned by real estate major Amrapali group. The tribunal created history in August by ordering winding up of two companies – VNR Infrastructures and Bhupen Electronic – under the new Insolvency and Bankruptcy Code after the borrowers and lenders failed to come up with plans to revive the businesses.

On Monday, the Supreme Court had stayed similar insolvency proceedings against real estate firm Jaypee Infratech on a plea by some home buyers. But on Tuesday, the apex court agreed to hear a plea by IDBI Bank seeking modification of the order.

A bench comprising Chief Justice Dipak Misra and Justices Amitava Roy and A M Khanwilkar considered the submission of the bank that staying the order of the National Company Law Tribunal (NCLT) in Allahabad had reversed the position and, as a consequence, the company had gone back to defaulting promoters.

The apex court has posted the IDBI Bank’s plea for hearing on September 11.

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