HCC’s Debt Will be Restructured Under RBI’s New Scheme for Stressed Assets

Shares of Hindustan Construction Company Ltd. rose as much as 4.9 percent after lenders agreed to recast its debt under the Reserve Bank of India’s Scheme for Sustainable Structuring of Stressed Assets, also referred to as S4A.

The decision by the joint lender’s forum will help bridge the cashflow mismatch between claims realisation, including interest, and debt servicing, according to HCC’s media release.

Under the S4A programme introduced by the RBI on June 13, the company’s debt will be divided into sustainable debt, which must be more than 50 percent of total debt, and unsustainable debt, which can be converted into equity or convertible debentures.

The lenders will decide on debt bifurcation in the next 90 days, HCC spokesperson Sandeep Sawant told Bloomberg News.

HCC had Rs 16,659 crore debt as on March 31, 2016.

HCC’s chairman and managing director, Ajit Gulabchand, told BloombergQuint in a telephonic interview, that the restructuring will help the company tide over cash flow timing mismatch. Gulabchand added that nearly Rs 3,000 crore is stuck in various courts despite the company winning these arbitration cases. He expects the company will need two to three years to recover this amount.