Hindustan Construction loans on brink of turning NPAs

 



20 MAR, 2012, 02.52AM IST, ANITA BHOIR & RACHITA PRASAD,ET BUREAU  




 A consortium of 27 lenders, including State Bank of India and Punjab National Bank, is persuading Hindustan Construction Co to pay up at least the interest before the month end to prevent the account from turning sour, said three bankers. 


The company that built the Mumbai Sea Link and a nuclear power plant in 1971 in Rajasthan is on the brink of losing the "standard" status with banks who are seeking Rs 90 crore in interest payments by March 31 so that they can restructure Rs 3,000 crore of loans. 


Officials at the Corporate Debt Restructuring cell will meet the company's executives once before the fiscal year end, but a package may not be finalised since getting on board more than 20 banks at a short notice is impossible. 


"HCC has been formally admitted to the Corporate Debt Restructuring cell," said one of the bankers in the know of things. "The implementation of the package would not be completed by March. The negotiations could spill over to April." Top banks involved in the transaction, including ICICI Bank, State Bank of India and Axis Bank, declined comment. 


Loans restructuring is poised to touch a record Rs 1.5 lakh crore this fiscal in the banking system as companies lured by high growth rates of the past few years loaded up on debt indiscriminately. The rise in input costs and interest charges is also squeezing companies' profitability. With many projects stalled due to government inaction, companies are throwing their hands up, saddling banks with bad loans. 


HCC, that's building the hill city, Lavasa, near Pune, posted a loss of Rs 134 crore in the December quarter as order flows slowed and payments from customers stalled. Its interest payment was Rs 30 crore higher at Rs 104 crore and it also suffered a Rs 64.87-crore loss due to cost overruns. 




The company, which has a consolidated debt of Rs 8,100 crore, may make losses next fiscal, too, its chief financial officer Praveen Soon had said. 


"We are trying hard to move from loss to cash profit and from that to net profit but it wouldn't happen for another year," Soon had said during earnings release. "We should be able to report operating profits by the first quarter of 2013-14.'' 


 

He declined to speak on loans restructuring. Interest payment to keep the account "good" may not happen as it contemplates sale of assets to repay debt. Top executives of the company had told bankers that raising cash appears a difficult task. 


If the payments are missed, state-run banks may be hurt more since private banks are receiving payments on their working capital loans. "Some of the large private sector banks have working capital and non-fund based exposure," said one of the bankers.