IVRCL lenders to invoke strategic debt restructure

Bankers of the Hyderabad-based construction and infrastructure company IVRCL Ltd have decided to invoke the provisions of Strategic Debt Restructure in the company.

The SDR provisions, according to the Reserve Bank of India guidelines, empower the company’s lenders to takeover the management of a firm when the loans they have extended are under threat of not being paid.

At a meeting held on November 26, the Joint Lenders Forum (JLF) has decided to invoke Strategic Debt Restructuring provisions and informed the company late on Monday. During the meeting, it was also decided that a senior lenders’ meeting will be held to decide on how to take the whole process forward.

R Balarami Reddy, Executive Director, and Group Chief Finance Officer, told BusinessLine, “The company has been informed by the lenders about the proposal and we would be meeting them later during the week to discuss the proposal and the way forward.”

“When a move like this is initiated, according to the RBI circular, the banks decide on the future course of action on how to put the business back on course. Such a move would entitle us to recoup over a-18 months period and during this phase the company would not be declared a non-performing asset (NPA). As of now, our cumulative debt, including interest, is about Rs.5,000 crore,” he said.

The company is under CDR mechanism wherein bankers and lenders, who are now the majority shareholders in the company, currently hold 43.88 per cent of the equity.

A consortium of lenders had approved a CDR package of Rs.7,350 crore and a non-fund based credit of Rs.2,000 crore to handle ongoing business, last year.

The company has been passing through one of its toughest business cycles over the past 12 quarters and has initiated measures to streamline its business while restructuring its functioning. Yet the high interest rate regime prevailing for several years, tough external conditions and poor liquidity and delays in divestment of stake in some of the matured projects, have pushed the company to a corner.

In recent times, Electrosteel Steels and Lanco Teesta Hydro are among those that have taken the SDR route to chart a way out of the financial mess. Typically, such companies are managed under the supervision of banks and when they get back to normalcy, the banks may consider roping in a suitor to manage the company.