Lenders to
Amtek Auto group have decided to go for a
special audit of
the books of various group companies before providing fresh loans to
help it repay Rs 800 crore of bonds coming up for redemption on
September 20.
While details of the action plan would differ from case to case, lenders
would also ask the promoters
to pledge more of their holdings and sell
some group companies to generate resources. In addition, promoters would
be required to bring their own resources to indicate their skin in the
game, a bank executive said.
A Joint Lenders Forum is working on the contours of the corrective
action plan, a senior public-sector bank official said. Banks have a Rs
26,000-crore exposure to the group; of this Amtek Auto accounts for over
Rs 7,800 crore.
Banker said lenders might also look at inserting a clause for strategic
debt restructuring (SDR), which would empower them to acquire a 51 per
cent stake or more in the flagship company or other group companies to
recover bad loans.
In June, the Reserve Bank of India (RBI) had allowed banks to hold 51
per cent or more of the equity after a debt-for-share conversion. Under
this, banks will have to closely monitor the performance of a company
and appoint professional management to run it. At the same time, the
banks themselves should try and sell their stake "as soon as possible".
The plan is being drafted under the 'early recognition and early resolution of stressed assets' framework.
RBI had
in 2014-15 prescribed this framework to nudge lenders to be proactive
in spotting stressed accounts and take prompt steps.Delh-based Amtek
group is an integrated auto and non-auto component manufacturer with
presence in 11 countries. It has combined revenues of over Rs 20,000
crore and presence in segments like forging and castings.
The group had made a string of acquisitions in the country and abroad,
in the automotive segment. But these failed to match the projected
revenues due to an economic slowdown and slump in demand. This put
pressure on Amtek Auto's finances, prompting it to seek funding support
from banks.
It is, however, still a standard account, as the company has paid the
interest component on schedule. But with a pressure on revenues, bankers
have put a question mark over its ability to pay instalments in future.
Earlier this week, rating agency CRISIL downgraded the long-term bank
rating for group company JMT Auto to 'BBB-' from 'BBB+', on
deterioration in credit profile marked by a shrinking revenue and
profitability.
JMT Auto's financial flexibility is likely to be affected substantially
after a significant deterioration in its majority shareholder Amtek
Auto's credit risk profile. Amtek Auto holds a 70.74 per cent stake in
JMT Auto.
This is the second time that Amtek Auto has found itself in a tight
spot. It was affected by the global financial crisis of 2007-08 along
with many other Indian companies, due to its exposure to foreign
exchange derivatives. The company had informed stock exchanges in March
2008 that it could potentially make a loss of up to $18 million (Rs
72.18 crore) in the next two years, given its exposure to currency
hedges and swaps. Its promoters had then promised to bring in a matching
amount to meet the obligation, should that arise, in the form of
10-year, interest-free non-convertible debentures or preference shares.