Stocks of debt-laden firms rally

Mumbai, June 14: With the Reserve Bank of India (RBI) introducing new guidelines on debt restructuring on Monday, stocks of several debtladen companies including Bhushan Steel, Jaiprakash Associates, GVK Power and Infrastructure, Alok Industries gained between 3.6% to 15.5% during Tuesday’s trade.

Infrastructure company, Jaiprakash Associates, which reported a gross debt of nearly `58,250 crore, rallied 15.5% post the announcement. The company which had touched an all-time low of `5.3 per share last week closed at `7.94 apiece on the BSE. Bhushan Steel and Alok Industries gained 11.5% and 13.8% respectively. The new debt restructuring guidelines also bought cheer to stocks of other debt-ridden firms like Jindal Stainless, Jaypee Infratech, Monnet Ispat and Gammon India which gained more than 4% each.

RBI released new rules on restructuring of stressed assets, allowing lenders to resolve stressed loans by bifurcating the sustainable portion of the debt from the unsustainable part and converting the latter to redeemable cumulative optionally convertible preference shares. For this to apply, the project needs to have commenced commercial operations, its total exposure (including accrued interest) of all institutional lenders in the account is more than `500 crore (including rupee loans, Foreign Currency loans/External Commercial Borrowings) and the sustainable debt should not be less than 50% of the current funded liabilities.

Experts believe that even though banks are yet to decide on loans that can be restructured, infrastructure companies are most likely to be the key beneficiaries of the newly introduced guidelines.