Fate of IVRCL in hands of banks

Hyderabad: Weeks after an under-construction flyover in Kolkata collapsed, banks with majority stakes have refused to fund the ongoing projects of infra major IVRCL.
After the execution of a Strategic Debt Restructuring (SDR) plan in March, banks had planned for a change of management as they control over 60 per cent of the company's stake. But once portions of the Vivekananda flyover collapsed in a heap, the reputation of IVRCL took a severe beating.
Now the company has stopped its work and demands by the West Bengal government to change the design of the project has not seen the light of the day.
Adding insult to injury, the infra giant has now been blacklisted by Jharkhand. The Madhya Pradesh government also slapped a case for delay in construction of a 155 km four-lane Indore-Ahmedabad national highway and Jhabua bypass road 15 days ago.
In a further embarrassment, the Jharkhand state electricity board has demanded Rs 750 crore from the company.
In the wake of a series of setbacks, IVRCL board meeting on May 30 will decide its future. The company says it is desperately waiting for fresh capital infusion to move forward to complete the projects on hand. Any delay by the banks to decide on fresh investment or change of management would be disastrous for the company at this juncture.
"We require support from the banks to complete major works in different states. Though some banks had agreed to resume and increase working capital limits, the Vivekananda flyover mishap has created hurdles," A Krishna Reddy, executive director of IVRCL told TOI. Reddy further said that the company is now looking for foreign investments.
"Foreign investors evinced interest in the company and wanted to invest. Now bankers will have to take a decision on supporting the company," he added.
Two Indian infra companies are said to have contacted the banks to take over the management.
Of the lending banks, the ICICI Bank tops the list with a stake of 6.21%, followed by the Indian Overseas Bank at 6.20%, IDBI at 5.66%, Canara Bank with 4.57% and SBI with 3.97%.
As per the SDR rules, banks first convert a part of their debt into equity and within 18 months they are required to find a buyer to take control of the company. But even after completion of the Corporate Debt Restructuring (CDR) in 2014 and SDR in March 2016, the banks could not get a buyer.
Banks have converted Rs 2,889 crore of their debt to equity at Rs 8.7 per share, which have a face value of Rs 2 while present share price of the company plummeted to Rs 4.
With the original promoter E Sudhir Reddy and his family holding a meagre 5.77% of the total equity, saving of IVRCL entirely depends on the banks.
"Huge public money has been blocked in IVRCL debt restructuring and further delay in finding a suitable buyer would result in more bleeding for the banks," said a senior bank official, who does not want to be quoted.
Interestingly, the failure rate for the CDR restructured cases has increased to 36% in September 2015 from 24% in 2013.
Banks are now looking to find a suitable company to take over the management.
"Why should we take entire responsibility when the banks do not want to resolve the issue in a professional manner? Cost of many projects awarded to IVRCL has almost doubled now and completing them after following the bank's conditions would not be a feasible proposition," said a senior official of an infra major, which recently evinced interest to take over IVRCL.
Industry experts feel banks have to take a pro-active initiative to bring the stranded infrastructure projects back on rails and to recover their money.