Power generator Lanco Infratech got a Rs 7,700 crore breather from its bankers as they approved a proposal to restructure its debt, today. The corporate debt restructuring (CDR) will allow the company a two-year interest holiday.
The lenders will restructure debt of Rs 4,400 crore and non-fund based exposure like bank guarantees and letters of credit worth Rs 3,300 crore.
It will also get additional funds of Rs 2.500 crore from the bankers. Of this, Rs 1,060 crore will be non-fund based. “We will use the additional funding vendors, suppliers and other service providers,&" said Adi Babu, chief financial officer of Lanco Infratech. The company has outstanding payments of around Rs 1,500 crore. It will also spend yet another Rs 1,000 crore to pay for impending work.
The promoters of the company, which includes the chairman Lagadapati Rajgopal, will have to bring in Rs 153 crore as their contribution. The payment will have to made before the signing of master restructuring agreement, which is expected to be signed by the end of the month.
As per the agreement, lenders will also reduce the interest rates by 2.5% for the first 3-4 years. This shall be compensated in the subsequent years as it will increase by 4.5%.
“The moratorium will ease the liquidity and will help us ease existing activity. This will help us make a comeback in engineering, procurement and construction (EPC) business. We will go ahead with our EPC business aggressively,&" Babu told Business Standard. He also expects business to normalise by March.
In the last 10 months, activity on the company's EPC business was stalled. In addition to slowdown in EPC business, Lanco's troubles which took it to CDR include frozen payments from state electricity boards (SEBs), leading it into a huge funding gap. The power generator is yet to receive as much as Rs 2,000 crore from power distribution companies in Karnataka as well as Haryana.
“There are two tariff orders pending with Central Electricity Regulatory Authority and Appellate Tribunal for Electricity (APTEL). Once these orders and judgements are passed, we will take around six months for payments to be cleared. We expect the payments to come over time and not immediately,&" said Babu.
Lanco has a power generating capacity of as much as 4,732 megawatts. The power business, like many other assets in the country, was affected by issues other than delayed payments like lack of fuel supply to both its coal and gas-based power plants. Earlier, the company had said that prevailing macro-economic conditions have affected it.
The company maintains that a complete turnaround in the power sector would happen only if the government provides fuel, especially for those projects which are completed. The state electricity boards should also increase tariffs to consumers and should be in a better position to buy more power as opposed to going for power cuts.
“Once these corrective measures are taken by the government, it will help the sector make a turnaround. But for the company, we expect many issues to be resolved by March expect for fuel for our gas-based power plants,&" said Babu.
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