As the uncertainty following the Comptroller and Auditor General’s (CAG) report on telecom companies continues, bankers who have taken exposure to these companies are getting the jitters. The plan of action ranges from drawdown of loans to seeking additional guarantees, to even recalling some of the loans, if the situation so warrants.
A CAG report alleged that many companies had suppressed facts, disclosed incomplete information and submitted fictitious documents for getting access to spectrum. Among the industrial houses that got licences were Unitech (now Uninor), Datacom (now Videocon), S-Tel, Swan and Loop Telecom. The report also said the process of giving dual technology licences to telecom firms, including Reliance Communications and Tata Teleservices, too, lacked transparency and fairness, and equal opportunity was denied to other similarly placed operators who could apply for use of dual technology.
Lenders say while they would take the wait-and-watch route, plans are ready to prevent the loans from going bad. “If the drawdown of the loan has not yet started, we will restrict that, and if companies have already started drawing money down, we will stop it immediately,” said a banker, who is one of the lenders to the new companies.
A senior official at IDBI Bank, who lent money to companies named in the report, said the bank was watching these developments seriously. “However, we have to keep in mind that payment of the loan disbursed is distinct from the alleged wrongdoing in getting licences. If the government really cancels their licence, we will definitely proceed with further action as the licence is one of the important considerations in giving credit,” he said.
* Sistema Shyam Teleservices (MTS) raised Rs 500 crore loan in March for two years
* Uninor has a bridge loan of Rs 5,000 crore, intends to raise debt of Rs 9,400 crore
* SBI, largest lender to the telecom industry, has reduced most of its exposure to new entrant
Bankers said if the situation got any worse, they would consider the option of seeking extra guarantees on the loans. “If we have to take the extreme step, we might look at recalling some of the loans,” said a top official at a top public sector bank. A lot of new telecom companies have raised loans in the domestic market in the last two years, to roll out their services.
Even if the licences of the erring companies are not cancelled, it is likely that they could be heavily penalised. If such heavy penalties are added to operations of telecom companies, which are already battling reduced margins amid the ongoing rate war, their business plans might change. As validity of the projects will change, bankers have started estimating the ultimate cost the companies could face post-penalty.
State Bank of India, one of the largest lenders to the telecom industry, has in the recent past reduced most of its exposure to new entrants. “We will be careful in taking additional exposure,” said a senior SBI official.
Sistema Shyam Teleservices (MTS) raised loans to the tune of Rs 500 crore in March, for a period of two years. Uninor, too, has a bridge loan of Rs 5,000 crore. The company earlier said it intended to re-finance this loan to a long-term loan and raise debt to the tune of Rs 9,400 crore.
“Banks that have financed new entrants have lent money supported by equity. We will depend on the strength and commitment of the sponsor company,” said a senior executive at a large private sector bank.