New Delhi: Hindustan Construction Co. Ltd (HCC) will start receiving arbitration awards locked up with the government agencies, by the end of October under government’s new policy, HCC chairman and managing director Ajit Gulabchand said.
“We have to get our banks to give us the bank guarantees, which is a small process. Once that is quickly done, we will be presenting those guarantees to get the money. The guarantees should be placed in another few days time. So by month end we should be able to start getting the money,” Gulabchand said.
The cabinet committee on economic affairs in September has cleared several measures proposed by the Niti Aayog to revive the construction sector such as easier norms for faster settlement of disputes between contractors and government departments, and partial deposit of funds by government agencies in form of arbitration awards.
The funds which had been locked in arbitration, made it difficult for construction companies to keep up with the interest payment on borrowed finances.
According to the policy, in cases where the arbitration decisions have gone against government agencies, these government firms would have to pay 75% of the arbitration award amount to an escrow account against margin free bank guarantee, if the award is being challenged.
“Non paid dues are high. Nearly Rs.3,400 crore is the awarded dues. Another Rs.4,500 crore is under arbitration. All that money is locked up,” he said.
HCC has a standalone debt of Rs.4,900 crore and the arbitration awards will help the company to immediately cut its debt by almost half and materially reduce it even further within 12 to 24 months.
The non-payment of dues by the government had dragged HCC to what Gulabchand called an “existential crises”.
The company’s lenders in July had said that they will consider restructuring the company’s debt under the RBI’s new scheme ‘Scheme for Sustainable Structuring of Stressed Assets, which allows banks to convert part of the company’s loans into equity-like instruments.
“It’s taking a bit too long. But it will hopefully close soon,” Gulabchand said.