Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Industry / Indian banks said to seek reprieve for $13 billion loan revamp
BackBack

Indian banks said to seek reprieve for $13 billion loan revamp

Indian banks ask the RBI to ease debt-management rules as they try to restructure about Rs87,000 crore owed by Essar Steel, Bhushan Steel

Banks including SBI, ICICI Bank are aiming to restructure the debt under a new program the RBI started in June. Photo: Hemant Mishra/MintPremium
Banks including SBI, ICICI Bank are aiming to restructure the debt under a new program the RBI started in June. Photo: Hemant Mishra/Mint

Mumbai: Some of India’s biggest lenders are asking the central bank to ease debt-management rules as they try to restructure about Rs87,000 crore ($13 billion) owed by Essar Steel Ltd. and Bhushan Steel Ltd., according to people with knowledge of the matter.

Lenders including State Bank of India and ICICI Bank Ltd. are aiming to restructure the debt under a new program the Reserve Bank of India started in June, said the people, who asked not to be identified because the information is private. The steelmakers don’t currently meet the program’s requirements because they have not generated enough free cash flow to service at least 50% of their liabilities, the people said.

The creditors are asking the RBI to reduce the serviceable-debt target used in the Scheme for Sustainable Structuring of Stressed Assets, or S4A, as the program is known, the people said.

Indian steel producers have found it more difficult to repay loans as higher raw-material prices cut into their earnings. The price of coking coal is up 129% in the past 12 months, even after falling 43% from a high in November, according to data compiled by Bloomberg.

Servicing loans

Lenders to the two steelmakers are also asking the central bank to consider a change to the way it calculates a company’s ability to repay debt, one of the people said. Under current rules, the RBI uses a firm’s latest results to determine the amount of free cash flow available to service loans. Creditors would prefer the RBI use more forward-looking figures, such as profit forecasts based on potential economic growth, according to the person.

“Banks make requests to us for changes in different regulations, which we examine and take a view," the RBI said in an e-mailed response to Bloomberg queries.

Bhushan Steel chief financial officer Nittin Johari didn’t immediately respond to a phone call and e-mail seeking comment. Representatives for State Bank of India and ICICI Bank didn’t immediately respond to e-mailed questions.

“Essar Steel has submitted a proposal to lenders which is under consideration," Ganesh Pai, a spokesman for the company, said in an e-mailed response to Bloomberg queries, adding that it’s “inappropriate" for the company to comment on matters between banks and the RBI. Essar Steel’s production volume for the quarter ended 31 December rose 61% from a year earlier, Pai said. Bloomberg

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 20 Jan 2017, 10:53 AM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App