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Banks identify Simplex Infrastructures as NPA, resolution plans underway

United Bank of India (UBI), the leader of a consortium of 28 lenders, has identified Simplex Infra account as 'non-performing asset' (NPA) in the third quarter of FY20, people familiar with the matter said. Bank of India too marked Simplex Infra’s Rs 24.33 crore in working capital loan as NPA in February.

Last Updated: Feb 18, 2020, 04.14 PM IST
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Following the financial stress, Simplex Infra is working on a resolution plan with its lenders, a top company official said.
KOLKATA: Simplex Infrastructures, which has built some of the landmark bridges and urban mass rapid transport system in key metros, has begun to default on bank loans as delay on payments by government agencies has led to a liquidity squeeze and subsequent cancellation of some large work orders.

The company's outstanding borrowings from banks and financial institutions were around Rs 3600 crore at the end of January.

United Bank of India (UBI), the leader of a consortium of 28 lenders, has identified Simplex Infra account as 'non-performing asset' (NPA) in the third quarter of FY20, people familiar with the matter said. Bank of India too marked Simplex Infra’s Rs 24.33 crore in working capital loan as NPA in February. UBI together with State Bank of India and Allahabad Bank have large exposure in the Kolkata-based engineering, procurement and construction (EPC) firm owned by the Mundhra family.

Following the financial stress, Simplex Infra is working on a resolution plan with its lenders, a top company official said. It has signed an inter-creditor agreement (ICA) with lenders, mandatory under the new regulatory framework for stressed asset resolution.

Though some private sector lenders are yet to sign the agreement, the company expects them to sign the ICA soon as any resolution plan approved by 75 % in value and 60 % in number is binding on all the lenders of the consortium under the Reserve Bank of India rule.

The company is optimistic of turning around with "good cash flow in escrow account, a strong order book to be executed for the next two-to-three years and with a viable business plan in place."

Simplex Infra reported a net loss of Rs 31.25 crore for the December quarter against a profit of Rs 36.25 crore the year ago. Simplex shares closed on Monday 4.98% lower at Rs 48.70 on BSE, while its 52-week high was Rs 195.50.

It had reported a marginal net profit growth at Rs 123 crore in FY19 but slid since due to macro issues with election at one hand, and change of guard at some state governments on the other. “The company’s performance was affected from February till June because of these reasons,” the company official close to the promoters, explained.

After Lok Sabha elections between April and May, there were state assembly elections in Rajasthan, Madhya Pradesh and Chhattisgarh.“Receivable being a sizeable amount in our nature of business, any delay in realisation of bills has a cascading effect on the future progress and new order we can bid for,” the official said.

Infrastructure businesses depend a lot on bank guarantee and working capital limit which are getting stretched and overdrawn in several projects across the country. Some Simplex Infra projects were troubled due to the delay in payments forcing the company to invoke bank guarantees, impacting its credit ratings.

In the annual report for FY19, company chairman Rajiv Mundhra referred to the unpredictability in timelines and executions in infrastructure projects “due to disruptions caused by implementation of GST as well as bottlenecks in some projects due to delayed customer payments clearances and land acquisition.”

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