Surya Pharma CDR fails; bankers to start recovery process

Surya Pharma's corporate debt recast package which had been approved by the lenders in March, 2013 has failed.

According to sources with direct knowledge of the development, the company's promoters failed to bring the required Rs 85 crore for the debt recast to go through. Following this development, bankers say they will move to recover their dues from the company, starting this month.

Under the rules of the CDR exercise, promoters are required to share up to 25% of the loss that banks incur. Debt restructuring involves a bank reducing the lending rate and increasing the loan tenure, thereby helping a troubled company meet its repayment obligations.

Surya Pharma's CDR package had been approved in March this year. The company had been given an interest rate of 10.5%, along with a 10-year loan extension. A consortium of bankers led by State Bank of India has an exposure of Rs 1,400 crore to the troubled pharma company. SBI has an exposure of around Rs 500 crore, while other lenders include PNB, and EXIM Bank.

Surya Pharma's management remained unavailable for comment despite repeated efforts. Bank sources say that the company's management has also stopped responding to calls from them, while it's CFO resigned from the post last month.

Interestingly, an increasing number of CDR cases have failed over the past couple of years. FY13 saw 10 cases that were undergoing CDR amounting to over `4000 cr fail. This is well above the figure of Rs 2,700 crore in FY12 and just Rs 700 crore in FY11. Sources also say that Varun Industries, another company undergoing CDR could be in danger. The banking system has an exposure of Rs 2000 cr to this account.