With rising interest and input costs and project delays hurting companies, lenders are expected to restructure loans amounting to Rs 1 lakh crore over the next 12-18 months, according to the estimates of ratings agency ICRA.
The need to soften the blow of the economic slowdown and control extent of slippages (loans turning into non-performing assets) is expected to drive corporate debt revamp.
Icra Managing Director Naresh Takkar told Business Standard that infrastructure — power generation units, electricity boards, roads and telecom — and textiles, as well as airlines, would be among the prominent sectors to see debt recast.
There have been cost and time overruns in the case of power generation projects, due to rise in fuel prices and delays in clearances. The power and telecom sectors are highly capital intensive and, hence, the loan exposures are also big.
The estimated amount is a combination of proposals that may be sent to corporate debt restructuring (CDR) forum and those dealt at the level of the banks.
The amount of debt referred to the CDR forum has gone up over six times to Rs 34,562 crore in the first six months of 2011-12, compared to only Rs 5,179 crore in the same period a year ago. The number of companies referred has risen from 21 to 35. GTL Infrastructure, a telecom tower entity of the GTL group, is a prominent case that was taken up at the CDR forum in the first half.
The stress is also building up in road projects and real estate. Another ratings body, Fitch, recently downgraded the rating for loans to two toll projects, where IVRCL was the sponsor, from BBB- to B-. Kumarapalayam Tollways Ltd and Salem Tollways Ltd are facing financial stress due to lower-than-estimated traffic.
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Ratings agency CARE downgraded long-term bank facilities of Mohali-based Taneja Developers and Infra Ltd from C to D. Delays in debt servicing and the continuing stretched liquidity profile due to additions into the land bank inventory at its existing projects site in Mohali were the main reasons for this.
The restructuring story does not end with only taking up fresh cases. Some viable units that were restructured before 2008 due to temporary cash flow problems are already showing signs of stress. They carry high risk to becoming NPAs.
Takkar said the rate slippage for debt recast accounts might increase from 15 per cent to more than 20 per cent.
State Bank of India’s portfolio of standard restructured assets was just over Rs 34,900 crore at the end of June.