Other large lenders to the firm, such as State Bank of India and ICICI Bank maintain the company as a standard account
State-owned lender Bank of India has reported its exposure to Essar Steel India Ltd as a non-performing asset (NPA), a senior bank executive said.
“From a recovery point of view, the account is a safe one. But interest payments were coming in on the 92nd or 93rd day, which is why we had to classify it as an NPA. They have to regularize the repayment and regularize their instalments,” the executive said on condition of anonymity.
The bank has an exposure to the tune of Rs500 crore to the company.
On Thursday evening, television channel ET Now reported the bank had classified its exposure to Essar Steel as an NPA, even though other large lenders to the firm, such as State Bank of India (SBI) and ICICI Bank Ltd maintain the company as a standard account.
“The company has submitted a revival plan to the lead lender and they are in discussion. Once SBI is convinced, they will convene a consortium meeting and we will take a formal decision,” said the executive.
On 13 May, Bloomberg reported that HDFC Bank Ltd had classified its loan to Essar Steel as a bad loan in the March quarter.
“We are not aware of this development. The bank has not intimated us about this. As far as we are concerned, the account is standard,” said a spokesperson for Essar Steel.
Executive vice-chairman of Essar Steel, Firdose Vandrevala, on Wednesday said Essar Steel had identified assets worth Rs12,050 crore to monetize. The company has already raised Rs4,850 crore—by selling an oxygen plant for Rs850 crore and its Odisha slurry pipeline for Rs4,000 crore.
The remaining Rs7,200 crore could be raised by selling the firm’s Visakhapatnam slurry pipeline and coke ovens, the management said.
The company has secured Rs3,825 crore in working capital from banks and raised $2.2 billion in pre-export finance—money borrowed against orders from foreign buyers—for early repayment of existing rupee debt, said the management.
“All these measures will result in interest rates dropping to 9% from current 12% while average tenure of our loans will fall to 12-13 years against the current average of seven years,” said Vandrevala.
Essar Steel will also seek to refinance Rs15,000 crore of loans under the so-called 5/25 scheme this financial year. Under the scheme, commercial banks can extend long-term loans of 20-25 years to match the cash flow of existing infrastructure projects while refinancing them every five or seven years.
In 2002, Essar Steel restructured its debt under the corporate debt restructuring scheme like many other steel makers. It exited the scheme successfully after repaying Rs2,800 crore to creditors in 2006.
Essar Steel, a part of the Essar Group, posted a net profit of Rs648 crore for the financial year ended 31 March, against a loss of Rs1,597 crore in the previous year, owing to a better raw material mix and a one-time gain from the sale of assets, said the management.
Essar Steel Holdings Ltd, the holding company of Essar Steel, has also infused Rs1,300 crore into the company, which has a debt of over Rs30,000 crore.
Source: www.livemint.com
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