PROACTIVE Advisories to manage cash at such cos, take operational role also
ICICI Bank is set to engage turnaround experts to help it recover stressed loans of about . 40,000 crore across nearly 100 ac` counts. The Reserve Bank of India had earlier this week given banks the go-ahead to take over companies to recover debt.
Discussions have begun with a few turnaround experts and the bank is expected to involve them in most of the cases, people familiar with the development said. In some cases, the experts will work on cash management in the stressed companies, while, in others, the turnaround experts could take more of an operational role, they said.
Negotiations with advisories are in final stages for about eight accounts, which could be closed by the end of the month.For most of the others, the bank intends to involve the advisories by the end of the current financial year.
In some cases, the bank is looking to put a monitoring team in place for companies that have started showing signs of stress.
The bank recently segregated its stressed loan book by forming a stressed asset cell, headed by senior general manager KM Jayarao, who used to head the cell from 2000 to 2005, till the time it was discontinued. There are three other general managers in the cell who are negotiating with turnaround experts for the stressed accounts.
ET could not independently verify the names of the advisories that are in talks with the bank. An email sent to ICICI Bank went unanswered.
India does not have many homegrown consultancies that have capabilities for actively running a company which is making losses.
Global professional services firms such as McKinsey and BCG have turnaround experts, as do the big four consultants, including EY, KPMG, PwC and Deloitte. In the past, Alwarez and Marsal has reportedly been roped in for turnaround in a few stressed assets.
Not all the loans in the 100 accounts are bad loans, though. “These are loans where the bank has observed some stress in the companies,“ one of the persons cited earlier said.
As of March 31, the bank's net non-performing assets, or bad loans, was at `. 15,095 crore. On the other hand, loans to companies whose facilities were restructured stood at ` . 11,017 crore.
“In some of the bad loan case, ICICI is one of the lenders in a consortium. In these cases, some ad visors could take a more active role, and may take up positions on the board as well,“ another person said. An advisor can take up the role of a chief executive officer or a chief financial officer in a distressed company, he said.
RBI recently allowed banks to take operational control of a company if the efforts to restructure loans fail. It also said that banks can sell stake to a new promoter to recover the dues. Banks can undertake “strategic debt restructuring“ by converting unpaid loans to equity, the central bank said. In such a scenario, the bank or consortium of banks must hold at least 51% stake in the company. The banks have an option to convert entire loan or partial loan to equity.
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