Public sector bank Punjab National Bank on Wednesday declared a borrowal fraud of Rs 1,203.26 crore in the non-performing asset (NPA) of Sintex Industries Ltd (SIL) at its large corporate branch in Ahmedabad, Gujarat. Sintex is a textile and yarn maker.
“A fraud of Rs. 1203.26 crore is being reported by Bank to RBI in the accounts of the Company (SIL). Bank has already made provisions amounting to Rs. 215.21 crore, as per prescribed prudential norms,” PNB said in a regulatory filing with the stock exchanges.
As per RBI’s regulations, when an account is declared fraud-hit, banks are supposed to make a 100% provision (Set aside) on the account over a period of a few quarters.
According to a Livemint report, Bank of Baroda, Canara Bank, Punjab and Sind Bank and Bank of India also have an exposure to Sintex industries.
Economic Times also reported that Sintex Industries defaulted on debt repayment to the tune of Rs 49.54 crore to 10 investors, of which Rs 45.84 crore is the principal amount, and Rs 3.70 crore is the interest that was due.
Sintex Industries has been facing severe financial crunch and liquidity constraints, while also overrunning costs of its projects. The company’s total debt stood at Rs 7,358.88 crore at the end of June.
The company said in its annual report, “The company is presently undergoing substantial financial stress and severe liquidity constraints coupled with changed industrial dynamics, time and cost overrun in completion of its projects, reduction in subsidies and incentive benefits with delay in disbursements, Covid related disruptions etc. which has resulted into reduction in capacity utilization of its plants and, therefore, steep fall in sales volume and incurring of losses.”
It also said that a comprehensive Resolution Plan had been submitted to all the lenders involving the re-structuring of debt availed. The proposal was prepared in accordance with the requirement set out in the circular issued by the Reserve Bank of India but was not accepted in all lenders meeting held on 5th July 2019.
The company submitted a revised Resolution Plan to lenders on 16th December, 2019, which was not accepted by the lenders due to higher provisioning requirement, post which a petition has been filed by the financial creditors before the National Company Law Tribunal (NCLT), Ahmedabad under Section 7 of Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process (CIRP) against the company.
“The ability of the company to continue as going- concern is predicated upon the outcome of CIRP and scale up of company level of operations,” the company stated.
Post the disclosure, on Thursday, the stock of PNB fell sharply to sit a 52-week low of Rs 26.30. Sintex Industries, on the other hand, crashed 4.8% on the BSE to Rs 1.99.