Next Round Of Assets Sale Could See Lower Recovery Rates: CRISIL

Stressed steel assets: Less bang for buck ahead

- Steel Insights Bureau

The hair cut seen in resolution of steel assets so far has been significantly lower than any other sector’s debt that got resolved under IBC as of March 2019 but the next round of resolution might witness lower recovery, rating Agency CRISIL has said in a report.

“With an outstanding liability of 62,000 crore as on March 2019, the top 17 stressed assets in the steel sector today are expected to seek or are seeking resolution through the IBC. This would include five steel assets referred by the Reserve Bank of India as part of NCLT-II round earlier. Unlike the first wave of debt clean-up the upcoming resolution cases shall largely be smaller assets concentrated in the long integrated, sponge iron, and flat-rerolling space,” CRISIL has said in a report.

Of the 62,000 crore outstanding liability, 42 percent resides with 6 long integrated players, 38 percent with 6 sponge iron/pig iron players, 18 percent with 3 flat re-rollers, and the balance with alloy steel and other players.

The Insolvency and Bankruptcy Code, 2016 (IBC) has made good progress by resolving the cases of about 94 companies with stressed liability of `1.7 lakh crore as of March 2019 recovering close to `0.7 lakh crore, translating into a haircut of about 58 percent for financial and operational creditors.

The disaggregation of these numbers throws up an interesting aspect: Just 16 steel assets had more than half – `0.9 lakh crore to be exact – of the overall stressed debt, and the haircut required was 47 percent.

The balance stressed debt worth `0.8 lakh crore involved 78 assets spanning textiles, construction, and auto components, among others. The haircut here was around 69 percent.