Neelachal Ispat Nigam has asked banks to refinance close to Rs 1,000 crore of loans relating to its steel plant at Kalinganagar, Odisha, under the Reserve Bank of India’s 5/25 scheme, lenders aware of the development told FE. The company is promoted by MMTC and Industrial Promotion and Investment Corporation of Orissa (IPICOL).
A senior banker confirmed the company has been late on repaynts and although not a non-performing asset (NPA) yet, the account is visibly stressed. “Only a flexible repayment under 5/25 can save the asset from slipping into NPA category,” the banker added. State Bank of India (SBI) leads the consortium of bankers and has loaned the company R400 crore.
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Neelachal reported a loss of R233 crore in FY15 on revenues of R1,248 crore, partly due to an interest expense of R173 crore.
Total loans at the end of March 2015 stood at R1,235 crore, down 8% from the previous year. Lenders to the company include SBI, Allahabad Bank, Indian Overseas Bank, Bank of Baroda and State Bank of Mysore, among others. The company is led by Ved Prakash as its chairman.
While MMTC owns 49.78% of the company, IPICOL held 15.29% as of March 2015.Other major shareholders include NMDC (12.87%) and Orissa Mining Corporation (12.32%), while IDBI Bank, Central Bank of India and Syndicate Bank together hold 4.6%.
The company has an integrated 1.1 million tonnes per annum iron and steel plant at Kalinganagar Industrial Complex, and produces pig iron and blast furnace coke along with nut coke, coke breeze, crude tar, ammonium sulphate and granulated slag.
Refinancing under 5/25, which has caught the attention of corporates and bankers alike, has made analysts wary of long-term asset quality. Crisil analysts say the 5/25 scheme may mask the true picture of asset quality and warned that about 15% of these assets could slip into NPA territory over the longer term. They estimate Rs 80,000 crore of assets could be refinanced under the scheme this year.
“We believe that the 5/25 scheme will replace the restructuring tool earlier available to banks especially for large loans. Restructured assets were visible in the reported numbers of banks. But now, the assets that will be part of the 5/25 scheme, they will not be necessarily be reported by banks and could get masked in the NPAs,” they said.
Since December 2014, the RBI has allowed banks to refinance existing infrastructure projects under the 5/25 model provided the projects have commenced commercial operations. The central bank said in a notification: “Banks may fix a fresh loan amortisation schedule for the existing project loans once during the lifetime of the project, after the date of commencement of commercial operations without this being treated as restructuring.”