Corporate Debt Restructuring (CDR) proposals rise sharply ::Angel Broking,

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Debt restructuring proposals rise sharply
Corporate Debt Restructuring (CDR) proposals received by banks have risen sharply in the
1HFY2012. The CDR mechanism has been in place in order to help companies that are
unable to repay liabilities. The CDR proposals received by the banks have jumped up by
around six times in the 1HFY2012 vis-à-vis the restructuring proposals received in
1HFY2011. However, the bulk of the increase can be attributed to a chunky account of
GTL, a network services firm (accounting for c.65% of the total proposals received in
1HFY2012).
Having said that, the rise in the restructuring proposals is in line with our view that the key
monitorable over the next few quarters is likely to be the strain on the asset quality front on
account of high interest rates and slowing domestic growth. We remain cautious on PSU
banks with higher exposure to riskier sectors and banks which have grown aggressively
over the past 2 years. As far as the private banking players are concerned we believe that
we have witnessed the trough of the asset quality cycle and may witness rise in slippages
over the next few quarters. However we believe that private banks are still better placed on
the asset quality front as compared to the PSU peers. As far as PSU banks are concerned
we prefer banks (Syndicate Bank, United Bank of India and Bank of Maharashtra) which
have a conservative asset quality profile and have been relatively moderate in terms of
growth over the past 2 years