Public sector banks face a hit of close to Rs 6,000 crore on account of their exposure to Sintex Industries which has been classified as a fraud by Punjab National Bank, the large lender to the company. Although banks have already classified the account as a non-performing asset, they will now have to make full provision for the loan within four quarters which is the requirement for fraud accounts.

Punjab National Bank  had informed the stock exchanges that it has classified a Rs 1203 crore to Sintex Industries (SIL) as a fraud. Hence, the bank reported a fraud of Rs.1203 crore. Bank has already made provisions amounting to Rs 215.21 crore as per prescribed prudential norms,” the bank said.

According to a report by Brickwork Ratings, PNB has the highest exposure of Rs 1,176 crore followed by Bank of Baroda Rs 649 crore.Dena Bank and Vijaya Bank consolidated exposure to Rs.949 crore.  Union Bank of India has a Rs 371 crore exposure which rises to Rs 621. Since, the  loans of erstwhile Andhra Bank which merged into Union Bank are added. Bank of India has a Rs 614 crore loan facility followed by Canara Bank (erstwhile Syndicate Bank) Rs 472 crore, Exim Bank (Rs 416 crore), Punjab & Sind Bank (Rs 333 crore), Central Bank of India (Rs 315 crore) Oriental Bank of Commerce (Rs 300 crore), Andhra Bank (Rs 250 crore). SBI has a term loan of around Rs 150 crore. Of the private lenders, South Indian Bank has the largest exposure (Rs 250 crore) followed by Karnataka Bank (Rs 100 crore) and IDBI Bank (Rs 92 crore)

Analysis

Additionally, the stock exchanges reported the first default and debt obligation in June 2019.In January 2020, SIL had informed the stock exchanges that PNB had filed a petition in the National Company Law Tribunal to initiate an insolvency resolution process for Rs 1078 crore after the company’s resolution plan under RBI’s June 7th, 2019 circular was rejected by lenders. Pending admission of the insolvency petition the company had submitted yet another resolution plan in August.

From May 2019, the company had stopped cooperating with rating agencies that had classified the borrower as a defaulter. According to a report by Brickwork Ratings on April 17, banks have an exposure of Rs 6,586 crore. Therefore,it is related to fund-based exposure was Rs 5,536 crore.

In its Q1 result filing the company reported a loss of Rs 707 crore on revenues of Rs 150 crore. The company said that it has $13.5mn of foreign currency convertible bonds outstanding. It has defaulted in interest payment on these bonds. It has also defaulted in repayments of non-convertible debentures amounting to Rs 500 crore. The company has blamed changed industrial dynamics, time and cost overrun in completion of its projects. Hence, it shows tremendous  reduction in subsidies and incentive benefits with delay in disbursements, Covid related disruptions for the default.

Final Words

According to Brickwork, the company has not been cooperating with rating agencies since 2019. The company’s name is synonymous with plastic overhead tanks in India.

SIL a Gujarat based Company.It is a leading textile manufacturer. SIL’s Textiles Division focuses on niche products and specializes in men’s structured shirting for the premium fashion industry. Textiles plants are located in Kalol and Amreli, Gujarat. The promoters and key management persons of the company include;.Dinesh B Patel (Chairman), Arun P Patel (Vice-Chairman), Rahul A Patel (MD) and Amit D Patel (MD).