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NPA crisis: Lanco Infra first among ‘big 12’ to face bankruptcy action, IDBI initiates proceedings

IDBI Bank's decision to recover its dues by taking the resolution to insolvency courts sent Lanco Infratech stocks tumbling 20 per cent
India TV Business Desk New Delhi June 20, 2017 14:17 IST
India TV Business Desk

​Lanco Infratech, a company involved in building roads and power, has become the first casualty among the list of top 12 corporate defaulters drawn up by the Reserve Bank of India last week to face bankruptcy action. IDBI Bank is learnt to have decided to recover its dues by taking the resolution to insolvency courts. The development hit stocks of the infra company, sending it tumbling down to its limit, or 20 per cent, to a ,ow of Rs 1.80.

The development follows a meeting of bankers that began on Monday to chart out the final course of action against loan defaulters. Bank officials met to decide on six of the 12 bad loan accounts for immediate referral to NCLT after the RBI named the largest defaulters to face bankruptcy proceedings. According to RBI, these 12 accounts owe Rs 2.5 lakh crore to the system, which constitutes around 25 per cent of gross bad loans.

IDBI Bank has fund based exposure of Rs 7,799 crore and non-fund based exposure of Rs 3,349 crore as on March 2016, while the overall dues from the company are more than Rs 17,000 crore.

Last week, the RBI's internal advisory committee (IAC) had sent the list of 12 accounts to bankers for immediate reference under the Insolvency and Bankruptcy Code (IBC). These 12 accounts are led by SBI (six of them), PNB, ICICI Bank, Union Bank, IDBI Bank and Corporation Bank, according to bankers. The 12 defaulters accounting for 25 per cent of total bad debt include Essar Steel, Bhusan Power and Steel, Alok Industries, Amtek Auto, Monnet Ispat, Lanco Infra, Electrosteel Steels, Era Infra, Jaypee Infratech, ABG Shipyard, and Jyoti Structures.

Following the RBI’s directions to banks to file for insolvency proceedings under the IBC in respect of the identified accounts, these cases will be accorded priority by the National Company Law Tribunal (NCLT). Once referred to the NCLT, the resolution of the case in terms of either a sell-off of assets or revival or winding up will have to be completed within 180 days.

The RBI’s action for bankruptcy proceedings comes after the enactment of the Insolvency and Bankruptcy Code 2016 (IBC).

Meanwhile, shares of other companies part of list of 12 also tumbled as bankers met to finalise action against defaulters the RBI had identified. Besides Lanco, Amtek Auto, Alok Industries and Bhushan Steel, which were trading like penny stocks, tumbled further as investor concerns grew over the equity value in the companies to be taken to bankruptcy courts.