Mumbai: A consortium of 15 banks, mostly state-run lenders which face the prospects of losing about Rs 4,000 crore after three foreign lenders of the troubled jewellery exporter Winsome Diamonds encashed their letters of credit, have formed a core group to monitor the issue on a regular basis.
The core group includes PNB, Bank of India, Central Bank of India and Canara Bank, according to a bank official.
"We have formed a core group to monitor the Winsome account and talk to the promoters. We are regularly monitoring the account and we met even yesterday to take stock of the issue," a senior official of a city-based public sector lender that is part of the core group told said on Tuesday.
It can be recalled that the domestic lenders like Punjab National Bank, which is the consortium leader with around Rs 1,800-crore exposure and other banks had given standby letters of credit (SBLCs) worth over Rs 4,000 crore.
Other banks include Central Bank of India, Bank of India, Union Bank of India, Canara Bank, Vijaya Bank, and IDBI Bank.
They had given SBLCs in favour of international bullion banks like StanChart of London, Standard Bank of South Africa, and Scotiabank, which have encashed these LCs recently after the Mumbai-based firm failed to pay up these foreign banks.
Winsome Diamonds & Jewellery, earlier known as Su-Raj Diamonds reportedly failed to service the dues on time following default by its clients who reportedly lost heavily on derivatives following the steep fall of gold prices.
The issue relates to Windsome's purchase of bullion from these three bullion banks for which it had raised letters of credit from 15 domestic banks in favour of these three foreign banks.
The problem started after Winsome's Dubai-based clients defaulted on their payment, leading to Winsome also defaulting its payment to foreign banks, which in turn invoked one of the letters of credit, resulting in all the LCs being invoked even before the maturity period.
The domestic lenders have an exposure of over Rs 6,000 crore to the company, out of which Rs 4,000 crore are standby LCs issued to these foreign banks.
When asked about the outcome of the meeting, and whether they will monetise the personal guarantees of promoter Jatin Mehta, the official said, "we are looking at all the possibilities," but did not elaborate.
If they will be able to get back a substantial portion of their money by monetising the personal guarantees, the banker did not give a clear answer saying they are yet do an evaluation.
The problem for the bankers is that last year they had released corporate guarantees and other and mortgages to the city-based jeweller to reportedly help it raise funds. Now what they are left with is only the personal guarantees of Mehta, who is lives in Dubai and Singapore now.
According to the terms of the SBLCs, the domestic lenders were required to pay the above-cited bullion banks if Winsome failed to service the loans and the foreign banks invoked all the standby letters of credit soon after Winsome defaulted, leaving the liabilities on domestic banks.
Mehta, related to the Adani Group promoters, had resigned as Winsome chairman last year and mostly operates from Dubai and Singapore.
The aforesaid bank official also said the lenders consortium is conducting a forensic audit on Winsome to verify the claims of the company that they are in genuine crisis.
If these banks fail to recover the dues before the end of June, then Winsome will become a non-performing asset on the books of banks, forcing them to set aside provisions, which will further crimp their already stretched balancesheets.
According to the Winsome's website, its core activities are manufacture and export of gold, silver and platinum jewellery studded with diamonds, colour stones and semi-precious stones, plain jewellery apart from manufacturing and exporting polished diamonds.
Su-Raj Diamonds was renamed as Winsome last year and Madan Khurjekar was appointed non-executive chairman after Jatin Mehta stepped down as chairman.
First Published: Tuesday, May 28, 2013, 18:53