In a growing sign of companies facing difficulties in meeting their financial obligations, the number of corporate debt restructuring cases in India has crossed the century-mark since the beginning of 2012.
A total of 101 cases were referred for Corporate Debt Restructuring (CDR) as of September 30, involving a collective debt amount of close to Rs 64,000 crore, according to data available with the CDR cell of bankers.
RBI had helped set up the CDR system in 2001 to help corporates facing financial difficulties due to “factors beyond their control and due to certain internal reasons.”
Besides helping the corporates manage their huge debts, it also seeks to safeguard the interest of banks and financial institutions through restructuring of certain debt cases.
High interest costs along with overall sluggishness in the domestic and global economies have made it difficult for companies to meet their debt obligations — resulting in a spurt in CDR cases.
According to the latest data available with the CDR cell, 466 cases involving a total debt of Rs 2.46 lakh crore were referred to it since inception. Of this, 101 cases involving about Rs 64,000 crore have been referred in 2012 itself.
Besides, 51 cases have been approved for restructuring of debt amount totalling nearly Rs 45,000 crore in 2012 as on September 30.
In the first two quarters of the current fiscal 2012-13, 74 debt cases were referred for restructuring debts totalling about Rs 40,000 crore. This is higher than the referred CDR cases for an entire financial year ever.
In the previous fiscal 2011-12, 87 cases (then a record) with an aggregate debt of about Rs 68,000 crore (over $12 billion) were referred for corporate debt restructuring.
The amount of such distressed debt had grown nearly three-fold from Rs 23,000 crore in 2010-11, while the number of cases also grew sharply by 78 per cent.
According to the CDR data, 50 cases involving an aggregate debt amount of Rs 40,000 crore were approved during 2011-12. In comparison, 27 cases with Rs 7,000 crore were approved for CDR exercise in 2010-11.
During the fiscal ended March 31, 2010, a total of 31 CDR cases were approved for debt of Rs 18,000 crore.
Experts say that the rising number of CDR cases does not augur well for the banking sector as also for corporates.
Of the 466 cases referred to the CDR cell so far, 75 cases involving Rs 27,400 crore have been rejected by bankers, while 64 cases (totalling over Rs 31,000 crore) are under finalisation of restructuring packages.
A total of 327 cases have been approved since the start of the CDR mechanism as on September 30, 2012 for a total amount of Rs 1.88 lakh crore.