Shares of these 12 companies plunge as banks begin meet to resolve NPA issue

Key Highlights: 

• RBI identifies 12 defaulters accounting 25% of gross NPAs
• Share price of banks defaulters plunge on BSE
• These 12 defaulters have more than Rs 5,000 crore loan each

Shares of 12 companies identified by the Reserve Bank of India (RBI) and banking sector plunged on Monday as insolvency proceedings against these defaulters commenced. 

On June 13, 2017, RBI through its Internal Advisory Committee (IAC)  recognised 12 accounts for resolution under Insolvency & Bankruptcy code (IBC). 

Later, a banker told PTI, "Beginning Monday (June 19, 2017), banks are meeting to discuss six of the 12 accounts named by the RBI before referring accounts to the National Company Law Tribunal (NCLT) by the end of this month.”

For accounts with more than Rs 5000 crore – where 60% or more exposure was already classified as NPA by banks as on FY16 – immediate reference to resolution through IBC will be made. 

Thus, a total of 12 accounts constituting of 25% of gross NPAs qualified for insolvency. 

Here's the list of 12 defaulters as per RBI's list who will undergo the insolvency proceedings.

Bhushan Steel leads the list with loan Rs 44,478 crore, followed by Lanco Infratech with Rs 44,364.60 crore, Essar Steel with Rs 37,284 crore and Bhushan Power & Steel with Rs 37,248 crore.

Companies like Alok Industries with loan amount Rs 22,075 crore, Amtek Auto with Rs 14,074 crore, Monnet Ispat with Rs 12,115 crore, Elecrtrosteel Steels Limited with Rs 10,273.60 crore and Era Infra Engineering at Rs 10,065.40 were also placed in RBI's list.

Other companies in the list were - Jaypee Infratech, ABG Shipyard and Jyoti with loan amount of Rs 9,635 crore, Rs 6,953 crore and Rs 5,165 crore respectively.

Time period for completion of case under IBC has maximum limit of 180 days and can be extended further by 90 days. 

Share price of Bhushan Steel was trading at Rs 59.10 per piece down 15.87%, while Lanco Infratech tumbled over 20% while a new low of Rs 1.88 per piece.

Alok Industries shares were down 10.86% trading at Rs 2.38 per piece, and that of Amtek Auto slumped by 19.97% trading at Rs 23.45 per piece.

Monnet Ispat plunged by 13.83% trading at Rs 29.60 per piece, while shares of Era Infra Engineering were suspended due to penal reason. Going ahead, share price of Electrosteel Steels also was trading at Rs 4.01 per piece lower by 4.94%. While Jaypee Infratech stocks also were below 4.76% at Rs 11 per piece.

On the other hand, share price of Jyoti Structures jumped over Rs 11 per piece above 20% and ABG Shipyard shares rose by nearly 4% at Rs 10.90 per piece despite the insolvency meeting.

The IAC will focus on top-500 exposures in the banking system which are classified partly or wholly as non-performing assets (NPAs).

In case of other NPAs, banks are given six months time to agree upon a resolution plan. If a resolution is not provided by banks in this time, the banks should be required to file for insolvency proceedings under the IBC.