Converting debt to equity, Kerala government plans to throw ailing PSUs a lifeline

The proposal has come with a set of riders that the state will take equity only in those PSUs which can make profit if their debt is converted into equity.

Published: 09th February 2019 03:19 AM  |   Last Updated: 09th February 2019 05:04 AM   |  A+A-

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Express News Service

THIRUVANANTHAPURAM: The state government plans to throw the overleveraged public sector units (PSUs) a lifeline. By permitting loan restructuring and thus allowing the state to take equity in the PSUs, one last-ditch attempt is planned to help those units which have taken too much debt make a turnaround.

The Restructuring and Internal Audit Board (RIAB) will soon submit a proposal in this regard to the state in order to bring more PSUs into the growth trajectory. The proposal has come with a set of riders that the state will take equity only in those PSUs which can make profit if their debt is converted into equity.
The move is expected to make nearly dozen units successful.

RIAB Chairman N Sasidharan Nair told Express nearly a dozen companies’ net worth is negative due to loan and interest.“If the company can turn profitable on converting all debt into equity, then the state will go for such an option, thereby bringing more PSUs into the growth track,” said Nair. Some successfully-running PSUs have invested in struggling units in the form of loan, which they have to repay with interest, according to officers.

It is expected the state would convert around Rs 100 crore it has given to various companies as loans into its equity even though that amount, as well as the list of companies, would be known only after a detailed ongoing assessment.

In the last two budgets, the government had earmarked around Rs 300 crore each to strengthen the public-sector undertakings. As many as 14 PSUs reported profits in the last financial year against 13 in the previous fiscal. The successful PSUs’ total profit also increased from Rs 88.4 crore in 2016-17 to `303.7 crore. The state government is eying to bring 25 PSUs into the growth track with implementation of the proposal.

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