Jinxed!

RBI’s one-size-fits-all strategic debt restructuring scheme is turning out to be a damp squib.

- Anand Adhikari

A year ago, lenders to engineering and construction major Gammon India Ltd invoked the Strategic Debt Restructuring (SDR) mechanism. A total of 16 banks, led by ICICI Bank, decided to convert a part of their loan into 63.07 per cent equity. The SDR Scheme, an improved version of the erstwhile Corporate Debt Restructuring, or CDR, mechanism, gives lenders sweeping powers to throw out managements of companies whose assets have turned bad. The bankers, however, could not find a buyer for the entire Gammon India and instead decided to restructure it into three parts — power transmission & distribution (T&D), engineering, procurement & construction (EPC), and the residual business. The Thailand-based GP Group has shown interest in the EPC assets while Ajanma Holdings is keen to buy a stake in the T&D business. The banks are fine with these offers. After all, their 80 per cent exposure is getting transferred to these two companies. Gammon India, too, is relieved, as most of its debt is going away with the EPC business.

Gammon India is among close to two dozen companies where bankers have invoked the SDR Scheme, launched 18 months ago to make the process of debt recovery faster and smoother. The list includes Alok Industries, Usher Agro, Diamond Power, Monnet Ispat, Jaiprakash Power and IVRCL. However, the scheme, like its earlier avatars, has found little success due to its rigid framework, and Gammon India is probably the only case where banks are hopeful of a turn in fortunes. At stake is ₹1,00,000 crore debt where banks have invoked SDR. So, what went wrong? Several things, say experts.