SINGAPORE (BLOOMBERG) - One Indian construction firm has learnt that racking up debt to add an executive jet and a coal mine to the mix maybe wasn't a good idea. Punj Lloyd's Singapore units filed for judicial management on Feb 17 after creditors rejected one of the two subsidiaries' debt restructuring plans, as some oil and rail projects bled losses and attempts to diversify into other business areas backfired.

Unsecured creditors would get zero to half-a-cent on the dollar recovery based on liquidation scenario analyses on Dec 22, according to court documents seen by Bloomberg. The builder's financial strains provide a window into why Indian banks are scaling back lending as their stressed assets reach a 14-year high.

Central bank governor Raghuram Rajan has given lenders until March 2017 to boost provisions, as soured loans threaten to hamper economic growth after 11 state-run banks incurred losses last quarter.

A group of lenders has placed restrictions on Punj Lloyd's investments to monitor its cash flow under a "corrective action plan", according to court documents. It's difficult to gauge the level of stressed assets from "corporates draining cash in poor investments," said Mehul Sukkawala, Singapore-based lead analyst for South Asia corporate ratings at Standard & Poor's. "In many cases, it's investments which seemed to make sense at the time of making investment, though due to the change in commodity cycle or economic environment or regulations, start registering losses."

"The company will work closely with the judicial manager, once appointed by the court, to solicit support" for a revised restructuring plan, Punj Lloyd said in an e-mailed reply to Bloomberg on Feb 18.

The potential recovery for creditors under the new plan is being assessed, it said. The New Delhi-based group intended to restructure S$230 million of debt owed to banks and unsecured creditors at Sembawang Engineers and Constructors and S$176 million at Punj Lloyd, according to their restructuring documents.

Creditors voted down the first, prompting the company to pull the second, according to a Jan 18 company filing. The interests of creditors outside the Punj Lloyd group were not seriously taken care of in the proposals, said Soon Wei Min, a director at Singapore-based Mirador Building Contractor in Singapore, which has taken legal steps to recover its dues. The defaulter had money but had chosen to settle inter-company debt ahead of suppliers, he added.

"Of course, we'll be glad if Punj Lloyd Pte comes up with a better plan," said Berry, a spokesman who goes by one name at Top Zone Construction & Engineering, one of the creditors. "We had wanted to support the scheme of arrangement but we couldn't beat the majority who opposed it. It's better to recover some money than nothing at all."

Punj Lloyd's units in Singapore bought a US$55 million Gulfstream G650 jet in 2008 and invested US$41 million to develop a coal-mine in Indonesia 2011, both part-funded by loans from the parent company. The aircraft was sold to the parent for S$50 million in late 2014 to settle the loans, while the coal mine may be sold to repay debt, according to the restructuring documents. "Punj Lloyd does not regret these investments," the company said in the e-mail. "Both the investments have economic value which would be unlocked in due course."

The listed parent sank deeper in the red in the nine-months through Dec. 31, with gross borrowings at 78 billion rupees against 7.3 billion rupees cash. In Singapore, it lost S$20.7 million building a petrochemical plant for Jurong Aromatics Corp. and faced late-delivery penalties on subway, waterworks and prison projects due to higher material costs, court documents show.

Indian banks had loaned 12 trillion rupees to companies involved in engineering, construction and infrastructure sectors as of the end of 2015, double the volume five years ago, according to central bank statistics.

India's loans growth has cooled to near the slowest pace in 20 years, while Junior Finance Minister Jayant Sinha estimated the size of stressed assets at about 8 trillion rupees.

"The capital goods and engineering sector has seen a lot of trouble, especially those companies that are leveraged to oil and gas," said Taher Badshah, a money manager in Mumbai at Motilal Oswal Asset Management. "Those in this space have got badly hit by the slowdown."