Investors dump stocks on liquidation fears

MUMBAI: Stock prices of the most companies, identified by the Reserve Bank of India (RBI) for bankruptcy proceedings have fallen sharply as banks move closer to try them at National Law Company Tribunal (NCLT).

For instance, Amtek Auto Ltd’s share price has fallen 24% since June 13, the day RBI said its internal advisory committee has identified 12 accounts, representing 25% of the gross bad loans in the banking system.

In the same period, Alok Industries and Bhushan Steel fell about 18% each. Lanco Infratech, which trades at ₹1.7 per share decline 39%.

Meanwhile, lead lenders in the consortium have started organising meetings with other banks in the so-called joint lenders’ forum to prepare a plan on moving the insolvency application at the NCLT.

Between Saturday and Tuesday, at least four such meetings were conducted, according to two bankers, who wish not to be named.

Meetings for other accounts such as Alok Industries, Bhushan Steel, Bhushan Power & Steel, Jyoti Structures and ABG Shipyard, among others, will be held this week, they added.

“Banks have a month as per the RBI letter to move NCLT. The discussions on the documentation process, selection of law firms, and also identify the current operations of the company. Once this settled, banks will also look if other parties such as vendors to company, also have any unpaid dues,” said one of the bankers earlier cited, who attended one such JLF.

Interestingly, not all stocks have fallen.

There are some like Jyoti Structures and ABG Shipyard, where prices have risen. Shares of Jyoti Structures have risen by over 38% since June 13.

Analysts said that in these cases, investors could be possibly betting on a resolution such as change of management which will bring in fresh funding.