New Delhi: To recover the Rs.20,000 crore owed by its customers, Bharat Heavy Electricals Ltd (Bhel) is trying to directly secure the disbursement of loans sanctioned to developers by lenders such as Rural Electrification Corp. Ltd (REC) for completing the stalled projects.
While in the earlier arrangement, payment to Bhel was routed through the developers, a direct disbursement would also help the lenders to realize the stuck loans.
“We are trying for direct payments from the lenders. This will be a win-win for both us and the lenders as they have loaned out money for these projects,” a Bhel executive said, requesting anonymity.
The state-run firm’s move comes in the backdrop of concerns about non-payment by customers. Slowing economic growth, high borrowing costs and delays in securing regulatory approvals have hit many infrastructure projects in India, including power plants, hurting the ability of their promoters to repay creditors and vendors.
Another Bhel executive, who also didn’t want to be identified, confirmed the strategy. “We have approached the lenders to pay us directly,” the second official said.
Mint reported on 20 February about Bhel stopping the supply of equipment and services to forthcoming projects of companies such as the Abhijeet Group and the Adhunik Group, and regulating supplies to projects of other companies such as Visa Power Ltd and Indiabulls Power Ltd.
Customers of Bhel owe it around Rs.20,000 crore in outstanding payments. India’s largest power generation equipment manufacturer has a total outstanding of Rs.40,000 crore owed to it. Of this, 50% are dues that are yet to mature for payment because they are linked to project milestones.
Credit Suisse India Research in a 12 April report on India’s capital goods sector wrote, “execution of a higher proportion of orders carrying fuel risk is likely to impact revenue growth, as such projects shall be prone to delays”.
“We look at different options to get our collectible which is Rs.20,000 crore, the deferred debt is Rs.20,000 crore, which is dependent on meeting certain milestones. One of the things that we are trying is to impress upon the lenders to pay us directly. We have been talking to REC and the banks. We are doing what we can to recover what is due to us,” said a third Bhel executive, who also declined to be named.
The strategy may work, with a case in point being Abhijeet Group’s 1,080 megawatts (MW) Jharkhand power project. REC and State Bank of India (SBI), lead lenders to the project, may directly pay Bhel to restart work on the stalled project. With six months of work left on the project, the lenders believe the best way to recoup their loan will be from the electricity generated from the project.
“The option of making a direct payment to Bhel is being worked upon. We are trying with Bhel to make a direct payment to them to complete the project. They have an outstanding of around Rs.600 crore to Bhel. Direct payment is an option. We have to be practical and our first priority is to get the project commissioned. Once the project is operational it will earn revenue,” an REC executive said on condition of anonymity.
Abhijeet Power had placed orders for the Chandwa power project in Latehar, Jharkhand, and one in Visakhapatnam (300MW) with Bhel. Abhijeet Infrastructure Ltd, Adhunik Thermal Energy Ltd and Visa Power were named in the Comptroller and Auditor General of India report on allocation of coal fields last year. The Central Bureau of Investigation has also charged Jas Infrastructure and Power Ltd, a subsidiary of the Abhijeet Group, JLD Yavatmal Energy Ltd and AMR Iron and Steel Pvt. Ltd in cases related to the allocations.
While REC is the lead lender for two units, SBI is the lead lender for the remaining two units.
A SBI executive said he is not aware of any such Bhel plan as it has not yet reached him.
“If there’s any such proposal, it has not been processed yet by our credit committee. Once they process it, then only it will be taken up for board-level talks,” the executive said, declining to be identified.
SBI has an exposure of around Rs.2,200 crore to the group, but has Rs.3,200 crore of collateral. This also comes in the backdrop of concern about loans given by banks to power sector projects.
Abhijeet Group declined comment but a company executive requesting anonymity confirmed the move.
For the fiscal ended 31 March, Bhel earned a net profit of Rs.6,485 crore compared with Rs.7,040 crore in the preceding year.
It registered a 1% increase in revenue to Rs.50,015 crore in the last fiscal. Bhel’s orders rose 43% to Rs.31,528 crore in the last fiscal but it secured no orders from non-state firms. The company has orders worth Rs.1.15 trillion on its book.
Bhel had received orders worth Rs.60,507 crore in 2010-11 and Rs.22,096 crore in 2011-12.