As Lanco Infratech walks towards NPA resolution; other defaulters' shares gain

Jay Anderson
June 20, 2017

The development hit stocks of the infra company, sending it tumbling down to its limit, or 20 per cent, to a, ow of Rs 1.80.

Shares of Lanco Infratech today plummeted almost 10 per cent, extending its previous sessions' decline, after the Reserve Bank directed its lead lender IDBI Bank to initiate insolvency proceedings for the company under the Insolvency and Bankruptcy Code (IBC).

Last week, RBI-appointed Internal Advisory Committee (IAC), in its first meeting, had recommended 12 accounts totalling about 25 percent of the gross NPAs (non-performing assets) of the banking system for immediate reference under IBC.

Shares of seven out of nine listed companies, which are on the Reserve Bank of India's list of firms to be forced into bankruptcy under a new regulation for failing to repay their debts, surged in trade today, with most of those stocks reversing yesterday's losses. Amtek Auto's scrip dived 19.97 per cent to close at Rs 23.45 and Bhushan Steel tanked 16.16 per cent to Rs 58.90 on the BSE.

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In a statement to BSE dated June 17, 2017, Lanco mentioned that the Reserve Bank of India had directed IDBI Bank - the lead bank of Lanco to initiate corporate Insolvency Resolution Process (CIRP) for the company under the Insolvency & Bankruptcy Code, 2016.

The proceeding comes on the heels of the RBI directing certain banks to take action against defaulting borrowers. As these are large accounts and involve many banks, they will try to take a common view on all administrative requirements before referring these accounts to the NCLT.

Meanwhile, shares of other companies part of list of 12 also tumbled as bankers met to finalise action against defaulters the RBI had identified. According to the Economic Times, IDBI has initiated the proceeding under the Insolvency and Bankruptcy Code.

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