GMR Infra seeks 5/25 rejig of Rs 37,000 cr debt

GMR Infrastructure has sought refinance under the Reserve Bank of India’s (RBI) 5/25 scheme for loans totalling over R37,000 crore, bankers confirmed to FE. According to a senior banker in the consortium, the company had “informally conveyed its request” for a refinancing via the 5/25 scheme.

“We too agree that the company requires a loan recast and it should happen in due course,” the banker said. Since the company has multiple project loans, the restructuring would be done for each one separately. “The outstandings are large so we will do as much as we can,” the banker explained, adding that the process was yet to begin.

He added that Reserve Bank of India rules required the lenders to ensure the net present value of the loan was protected if the tenure of the loan was extended. “If necessary, the interest rate will be raised, there could be a step-up towards the end,” he said.

According to the company’s FY14 annual report, bankers in the consortium include Axis Bank, Central Bank of India, ICICI Bank, IDBI Bank, Yes Bank and United Bank. In FY15, the company reported a net loss of R2,733.3 crore on the back of R10,935.2 crore in revenue. Its operating profit also fell 26.7% to R795 crore in FY15 and its finance costs rose 21% to R3,572 crore.

According to Bloomberg data, the company’s consolidated net debt rose 12.7% to Rs 37,095 crore.

Analysts point out that GMR has freed up loans to the tune of Rs 11,000 crore through the sale of stakes in various assets such as a Singapore power project, apart from the Jadcherla and Ulundurpet projects and Turkey airport. “Despite the monetisation of assets worth Rs 11,000 crore, GMR has seen a rise in the debt level,” they noted.

A refinancing of loans works well for borrowers because they do not need to bring in fresh equity as they would have been required to do had the loan been restructured via the corporate debt restructuring (CDR) cell. However, analysts at Crisil recently cautioned such refinancing would mask the true picture of asset quality and warned that about 15% of these assets might 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,” Crisil noted.

Since December 2014, 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.”

Till April, banks were resorting to restructuring stressed loans via CDR since the RBI allowed such assets to be categorised as ‘restructured standard’, which meant banks needed to make a provision of just 5% and not a minimum of 15% as is required for an NPA. However, that forbearance has been lifted from April 1.