India / PNB reports ₹1,203 crore fraud by textile company Sintex Industries

Zoom News : Oct 01, 2020, 12:11 PM
New Delhi: Punjab National Bank (PNB) has reported a new borrowing fraud worth ₹ 1,203 crore by the troubled Ahmedabad-based Sintex Industries Ltd, whose debt-restructuring plan was rejected by lenders in December last year.

Once an account is declared as fraud-hit, banks need to set aside 100% of outstanding loans as provisions either in one go or over four quarters, according to the banking regulator's rules. In this case, PNB said it has made provisions of ₹215.21 crore.

“A fraud of Rs. 1203.26 crore is being reported by the bank to Reserve Bank of India (RBI) in the accounts of the company. The bank has already made provisions amounting to ₹215.21 crore, as per prescribed prudential norms," the bank said in a regulatory filing.

"Reporting of borrowal fraud of ₹ 1203.26 crore in NPA account of M/s Sintex Industries Ltd (SIL) at Large Corporate Branch at Ahmedabad, Zonal Office, Ahmedabad," PNB said in the regulatory filing.

The company, a major textile and yarn maker, is part of Sintex group, maker of plastic water tanks, which is housed in another listed entity - Sintex Plastics Technology Ltd - after a demerger of Sintex Industries in 2017.

Sintex is engaged into the cotton and 100% wet linen yarn manufacturing and produces premium quality compact and specialized blended yarns, it said in its FY20 annual report. According to the annual report, the company is undergoing substantial financial stress and severe liquidity constraints coupled with changed industrial dynamics, time and cost overrun in completion of its projects.

The company had informed stock exchanges on 3 April that it has defaulted on repayment of principal amount on loan from banks and financial institutions of ₹2,203.57 crore. Then, on 8 April, the company said it defaulted in the coupon payment on its non-convertible debenture (NCD) issue.

According to Care Ratings, Sintex Industries had submitted a comprehensive resolution plan to its lenders in July 2019 and December 2019 which were, however, not accepted by the lenders.

“Subsequently, financial creditors filed a petition to the National Company Law Tribunal (NCLT), Ahmedabad under Section 7 of the Insolvency and Bankruptcy Code (IBC) 2016 for initiating corporate insolvency resolution process against the company," the Care Ratings report said on 11 June.

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