Lenders invoke SDR rules to take control of Ankit Metal and Power

Lenders to Kolkata-based steel maker Ankit Metal and Power Ltd have decided to convert the company’s outstanding debt into majority equity and take control of the company under the so-called strategic debt restructuring (SDR).

The 14-member consortium of lenders to the company include State Bank of India (SBI), IDBI Bank, Andhra Bank, Syndicate Bank and Indian Overseas Bank.

The reference date for conversion is 16 December, the company informed the stock exchanges on Thursday. As of 30 September, Ankit Metal’s total debt was ₹ 1,207.93 crore.

The notice to the BSE did not say whether the entire debt will be converted to equity.

Under the SDR norms introduced by the Reserve Bank of India (RBI) in June, banks are allowed to acquire a 51% stake or more in companies where debt restructuring fails to revive them. The banks then have to sell the stake to a new promoter within 18 months.

Ankit Metal was floated in 2005 as an integrated steel plant to produce 100,000 million tonnes per annum of rolled products comprising sponge iron, steel melting shop, billets and rolling mill, along with a 12.5 megawatt captive power plant.

The company faced stress due to a slowdown in demand for steel products.

For the quarter ended 30 September, Ankit Metal reported a loss of ₹ 72 crore. This was higher than the ₹ 47.37 crore loss it reported in the same quarter a year ago. Net sales for the quarter rose 4% from a year earlier to ₹ 291 crore.

According to the company’s annual report for the fiscal year ended 31 March, Ankit Metal had received an approval for corporate debt restructuring (CDR) in September last year. “The aggregate present value of the outstanding sacrifice made/to be made by CDR Lenders as per the CDR package is approximately ₹ 48,176 lacs,” the annual report said.

Shares of Ankit Metal and Power Ltd on Thursday closed at ₹ 1.95 apiece, up 7.14%, on the BSE, while the benchmark Sensex gained 1.21% to end the day at 25,803.78 points.

On 14 December, lenders led by SBI invoked SDR on alloy maker Rohit Ferro-Tech Ltd. Previously, lenders to IVRCL Ltd, Gammon India Ltd, Monnet Ispat and Energy, Electrosteel Steels Ltd, VISA Steel, Lanco Teesta Hydropower Ltd and Jyoti Structures Ltd decided to convert debt to equity, according to stock exchange notifications by these companies.

SDR is fast gaining favour among lenders as a way to try and clean up their books, though some analysts have questioned the ability of banks to sell these assets in the 18-month period.

RBI governor Raghuram Rajan on 1 December said the central bank expects lenders to clean up their balance sheets by March 2017. In a meeting with top bankers on 14 December, Rajan took stock of the asset quality situation at various banks and how they were planning to improve their positions.