As reported by The Hindu Business Line on 12 Oct 2011, in consultation with Ministry of Finance and the Reserve Bank of India, the Ministry of Textiles will work on formulating a restructuring plan for the textiles industry. The issues which are expected to be addressed in this restructuring plan will include moratorium on repayment of TUFS (Textile Upgradation Fund Scheme) loans, packing credit in foreign currency to be made available by banks, working capital assistance and interest subvention on export of textiles and clothing.
Mr A.B. Joshi, Textile Commissioner made a statement that the technical textiles industry has grown to Rs 63,000 crore in 2010-11 from Rs 43,000 crore in 2007-08, which accounts for 11 per cent growth a year and is expected to touch Rs 1,58,000 crore by 2016-17 at a growth rate of 20 percent a year. The Government in its 12th Five-Year Plan has allocated funds to the development of Centres of Excellence (CoE) for the various technical textiles sectors.
The Hindu Business Line on 11 Oct 2011 published an article stating that currently, the industry is undergoing a major re-orientation towards non-clothing applications of textiles such as thermal protection and blood-absorbing materials, seatbelts, adhesive tape, and other specialised products and applications. Furthermore, with the phasing out of the Multi-Fibre Arrangement, the Indian textile industry is optimistic due to new investment and Government initiatives.
Slowdown in demand, short-supply of raw materials, volatile commodity prices, overleveraged balance sheets, and rising interest rates, among others, are increasingly driving Indian companies to seek debt restructuring. In the second quarter of the current financial year, the quantum of corporate debt that came up for restructuring with the banking industry-promoted corporate debt restructuring (CDR) Cell was about 12 times higher as compared with the corresponding year ago period.
Nineteen corporates with debt aggregating Rs 28,889 crore were referred to the CDR Cell for restructuring in quarter ended September 30, 2011, against 12 corporates with debt aggregating Rs 2,469 crore in the corresponding period last year.
As per the article publish by The Hindu Business Line on October 9, 2011, in the September quarter, some of the companies that came up for restructuring include: GTL Infrastructure (exposure of banks to this company is Rs 10,000 crore), Chennai Network Infrastructure (Rs 6,000 crore), GTL (Rs 5,000 crore); KS Oils, SBQ Steels (between Rs 1,000 crore and Rs 2,000 crore each), Empee Sugars & Chemicals, Gold Plus Glass Industry (about Rs 400 crore each), Soni Ispat, Maruti Cotex, and Metalman Industries (about Rs 200 crore each).
Interest rate rise is just one among the plethora of problems that corporates are dealing with in the current adverse macroeconomic scenario. Bankers also fault the multiple banking arrangements, whereby, each bank independently appraises a project and extends credit, for some corporate becoming overleveraged.
Overall, in the first six months of the current financial year, 35 corporates with debt aggregating Rs 34,562 crore were admitted for restructuring in the CDR cell in quarter ended September 30, 2011, against 20 corporates with debt aggregating Rs 5,033 crore in the corresponding period last year.
The CDR Cell was jointly floated by banks and financial institutions in 2001 to restructure debts of viable corporate entities affected by internal and external factors. Under CDR, creditors, among others, make concessions by reducing the interest rate, reschedule repayments, convert debt into equity/ preference shares, waive principal/ interest (to a limited extent), and convert working capital irregularity into working capital term loan.
CDR, according to the RBI guidelines, applies only to multiple banking accounts/ syndicates/ consortium accounts with outstanding exposure of Rs 10 crore and above with banks and financial institutions. For a corporate account to be referred to the CDR Cell, the support of 60 per cent of creditors by number in addition to the support of 75 per cent of creditors by value is required with a view to make the decision making process more equitable.
This article is just a compilation of various news reports published by THE HINDU BUSINESS LINE in the month of Oct 2011.
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