In an interview to CNBC-TV18, Batra said Pipavav was in the process of getting final approval for Corporate Debt Restructuring (CDR). But that would entail the promoters having to arrange for a significant equity contribution.
Batra said the company’s working capital needs have been re-assessed and the CDR requires infusion of Rs 160 crore in one month.
Below is the transcript of BK Batra’s interview with Sumaira Abidi and Reema Tendulkar on CNBC-TV18.
Reema: You are leading the bankers consortium which is trying to do the corporate debt restructuring (CDR) for Pipavav Defence. First can you walk us through what the exposures are, what is the total amount that we are talking about which wants to be restructured and secondly what would be IDBI Bank’s exposure to Pipavav Defence as well as Reliance Infrastructure?
A: I would not be remembering the exposures but I can tell you that the case of Pipavav Defence is in CDR and it is in the process of getting its final approvals. The deal that has happened yesterday with Anil Ambani Group, we look at it as a very positive development. The company had issues about liquidity and high leverage. We expect that with this deal happening, the liquidity issues of the company should get largely addressed.
As a part of CDR package also the promoters were expected to bring certain amount of equity. So it will become easier now to get that equity into the company and for the company’s operations to be ramped up. The company has been on the cusp of growth backed by the existing orders and expected orders in particular from the defence sector and therefore association with a group like Anil Dhirubhai Ambani Group (ADAG) should help it achieve that growth.
Sumaira: Some of the reports we heard suggested that some lenders who are part of the consortium have some concerns or are sort of reluctant to give additional working capital to Pipavav, is that something you could confirm for us?
A: When a company has been facing liquidity problems and its accounts with some of the banks are not running regular, it isn’t normal then for banks to give working capital in a normal fashion. So, banks become a little reluctant and they start looking at things more closely.
This company has been facing issues of liquidity and their accounts were irregular with some banks and that is the reason it earlier came into the joint lenders\’ forum (JLF) arrangement and then it was decided by the lenders collectively that we should undertake restructuring under the aegis of CDR. While this process was on, largely the contours they have been drawn up, more or less finalised; it became clear that the existing promoters will have to arrange significant amount of equity infusion. I think this is what hastened or accelerated their induction of strategic investor who would facilitate this equity infusion.
Reema: Can you give some more colour, you indicated that the promoters are expected to bring in equity. In our understanding we thought the money infused will go to the promoters and not much will be used for the working capital as well as debt. Can you tell us how much money the new promoters will be infusing in Pipavav Defence?
A: The immediate requirement as per the CDR package, I think it runs into Rs 160 crore that is supposed to be brought in within a month or so and we are expecting that should not be much of problem. Thereafter whatever is needed by way of equity, the new promoters will be under an obligation to arrange.
Reema: Have you had any conversation with either Pipavav or the new promoters, have they promised to infuse this Rs 160 crore immediately in the next one month?
A: That is the requirement of CDR so that will need to be done.
Sumaira: Would you have any exposure to Reliance Infrastructure as well and therefore would this cumulative debt exposure be a cause of worry?
A: We do have exposure to Reliance Infrastructure and we need to look at what the aggregate exposure to the company and the group would be. I have not looked at the figures but I think it should be within the permissible limits.
Reema: As bankers to the deal I am sure you have studied it very carefully far more than us, can you tell us how much of the money infused by Reliance Infrastructure will go into the company per se, is there any amount at all?
A: Let me admit upfront that we have not yet received any details of the deal because they have been made public only last night. We have just been orally informed that this what has been done and details we have not yet been provided at least. So, as soon as we get details we will analyse.
Sumaira: Going back to our initial question regarding the total debt or the exposure that the consortium have, while I am not asking you for the exact figures would you be able to confirm whether it is in the region of Rs 7,500 crore or is it above Rs 11,000 crore?
A: It is difficult for me to recall what total exposure is but it is significant. It should be above Rs 5,000 crore. I really do not remember it so it is not proper to speak out the figure unless you are very sure.
Reema: You also indicated that this case is in its stages of final approval. Can you give us some timeline how soon the CDR board is likely to clear Pipavav’s case?
A: We are expecting it to be done within this month.
Reema: There is absolutely no objection to this deal?
A: Lenders have discussed it at preliminary stage and then at stage of final restructuring package also they have discussed it in CDR. They are supposed to go back to their authorities and convey their formal approval. Those are coming in and we are expecting that it will go through.
Reema: Since it is in the final stages can you give us some ballpark idea about what the repayment terms will be under the CDR package?
A: I do not recall but broadly I can tell you that the companies requirement for working capital has been reassessed and therefore whatever was the irregularity in the existing working capital account that normally is frozen, converted into working capital term loan. Then it carries rate of interest which is normally lower than the existing rate of interest and fresh working capital is assessed based on the company’s business plan that is what is committed to be provided.