PSU banks face Rs 6,000cr Sintex hit

Mayur.Shetty@timesgroup.com

Mumbai:

Public sector banks

face a hit of close to Rs 6,000 crore on account of their exposure to Sintex Industries, which has been classified as a fraud by Punjab National Bank (PNB), the largest lender to the company. Although banks have already classified the account as a

non-performing asset

, they will now have to make full provision for the loan within four quarters, which is the requirement for fraud accounts.

PNB on Wednesday had informed the stock exchanges that it has classified a Rs 1,203-crore loan to

Sintex

Industries (SIL) as a fraud.

“A fraud of Rs 1,203 crore is being reported by the bank to the RBI in the accounts of the company (SIL). Bank has already made provisions amounting to Rs 215 crore as per prescribed prudential norms,” the bank said.

According to a report by

Brickwork Ratings

, PNB has the highest exposure of Rs 1,176 crore followed by Bank of Baroda with Rs 649 crore. If the exposure of erstwhile Dena Bank and Vijaya Bank are consolidated, it rises to Rs 949 crore. Union Bank of India has a Rs 371-crore exposure, which rises to Rs 621 crore when loans of erstwhile Andhra Bank (which merged into Union Bank) are added.

Bank of India has a Rs 614-crore loan facility, followed by Canara Bank (erstwhile Syndicate Bank) Rs 472 crore, Exim Bank (Rs 416 crore), Punjab & Sind Bank (Rs 333 crore), Central Bank of India (Rs 315 crore), Oriental Bank of Commerce (Rs 300 crore), and Andhra Bank (Rs 250 crore). SBI has a term loan of around Rs 150 crore. Of the private lenders, South Indian Bank has the largest exposure (Rs 250 crore) followed by Karnataka Bank (Rs 100 crore) and IDBI Bank (Rs 92 crore)

In June 2019, the company had first defaulted on debt obligations, which were reported to the stock exchanges. In January 2020, SIL had informed the stock exchanges that PNB had filed a petition in the National Company Law Tribunal to initiate an insolvency resolution process for Rs 1,078 crore after the company’s resolution plan under RBI’s June 7, 2019 circular was rejected by lenders. Pending admission of the insolvency petition, the company had submitted yet another resolution plan in August.

From May 2019, the company had stopped cooperating with rating agencies, which had classified the borrower as a defaulter. According to the report by Brickwork Ratings on April 17, banks have an exposure of Rs 6,586 crore, of which fund-based exposure was Rs 5,536 crore.

In its Q1 result filing, the company reported a loss of Rs 707 crore on revenues of Rs 150 crore. The company said that it has $13.5 million of foreign currency convertible bonds outstanding and has defaulted in interest payment on these bonds. It has also defaulted in repayments of non-convertible debentures amounting to Rs 500 crore. The company has blamed changed industrial dynamics, time and cost overrun in completion of its projects, reduction in subsidies and incentive benefits with delay in disbursements — along with Covid-related disruptions — for the default.

According to Brickwork, the company has not been cooperating with rating agencies since 2019. The company, whose name is synonymous with plastic overhead tanks in India, was created after the group demerged businesses into two companies Sintex Industries and Sintex Plastics Technology in 2017.

SIL, a Gujarat-based Company, is a leading textile manufacturer. SIL’s textiles division focuses on niche products and specialises in men’s structured shirting for the premium fashion industry. Textiles plants are located in Kalol and Amreli, Gujarat. The promoters and key management persons of the company include.Dinesh B Patel (chairman), Arun P Patel (vice-chairman), Rahul A Patel (MD) and Amit D Patel (MD).