(An earlier version of this story inadvertently pegged UCO Bank's loans to Sunil Hitech as Rs 740 crore. That number has been updated to Rs 400 crore after clarification from the company.)
The slowdown in the business cycle, which has resulted in several companies being put on the block thanks to the government’s bankruptcy law, may claim one more victim.
Infrastructure firm Sunil Hitech Engineers is likely to be put under insolvency proceedings on September 5. The petitioner: American Express, which claims Sunil owes it around Rs 45 crore for usage of corporate credit cards.
American Express had dragged Sunil Hitech to the National Company Law Tribunal (NCLT) in July. According to a source, Sunil sought 50 days to clear the payments and wanted to settle the matter out of court. But two weeks back, it came back and said it was facing difficulties raising money to repay the dues.
The NCLT will now admit Sunil Hitech into bankruptcy proceedings. Once admitted, an insolvency resolution professional (IRP) takes operational control from a company’s promoters. The promoters get 270 days to find buyers for the company, a move that has to be approved by a committee of creditors (CoC). Failure to do so results in the company being liquidated.
Interestingly, UCO Bank, which is the largest lender to the engineering firm, having loaned around Rs 400 crore, is not leading the motion. However, the source Moneycontrol spoke to, who is close to Amex, says the credit card company expects UCO to support the petition.
An email to the company and a call to UCO Bank chief remained unanswered.
Other banks that have made loans to Sunil Hitech include Union Bank of India, Punjab National Bank, Oriental Bank of Commerce and ICICI Bank.
The insolvency and bankruptcy law, passed in 2016, has kickstarted a fire sale of distressed companies, especially those in the infrastructure sector, whose loans have been declared as non-performing assets.
The Sunil Hitech stock, once dubbed as attractive by many high-profile investors, has tumbled over the past one year, falling from a high of Rs 22.6 (adjusted) to about Rs 2.8 low, a loss of about 88 percent.
The Enforcement Directorate (ED) had attached cash deposits worth Rs 25.44 crore of the company in a coal block case under the Prevention of Money Laundering Act (PMLA).
The company’s stock was also added to the additional surveillance mechanism (ASM) list put out by SEBI in June this year.
As per the company’s consolidated financial statements, as of March 2018, it had a total debt of Rs 1,785 crore as opposed to equity of Rs 641 crore.
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