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Some of the premier names in corporate India are struggling under an increasing debt burden, with ten corporate houses having outstanding loans of Rs.5.47 lakh crore.
The groups include Adani, Essar, GMR, GVK, Jaypee, JSW, Lanco Reliance ADA, Vedanta and Videocon, noted a Credit Suisse report entitiled ‘House of debt- revisited.’
“...profitability at most of these groups has continued to be under pressure and their aggregate debt levels have increased by a further 15% in FY13. Among the largest increases have been at GVK, Lanco and ADA where the gross debt levels are up another 24%,” said the report dated 13th August and authored by research analysts Ashish Gupta,Kush Shah and Prashant Kumar.
The report noted that the falling rupee would add to the companies’ woes.
“Many corporates' loans are 40-70% foreign currency denominated; therefore, the sharp depreciation in the rupee is adding to their debt burden. Adani Enterprise and Reliance Comm have the largest percentage of borrowings through forex loans,” it added.
The rupee touched an all-time low of 62.03 during trade on Friday.
The fate of the power projects for these companies, in excess of 13,000 MW in the pipeline, would determine how well they are able to deal with their debt, said the report.
Operating capacities would double for companies such as Adani Power, Reliance Power and GMR Infra if the projects are online in time. Delays could result in debt restructuring, suggested the report.
“The cash flow strain is also likely to intensify as debt repayments are 30-150% higher YoY in FY14 and repayments due are 2-18x their FY13 profits.” noted the trio.
