Ind-Ra: Restructured Assets May Shoot Up by INR600bn-INR1,000bn in Next Five Months

Around one in four of the 500 largest corporate borrowers may formally be tagged as financially distressed (identified as NPA, CDR or restructured) by end-FY15, estimates India Ratings & Research (Ind-Ra). The cumulative impact may be an incremental INR600bn-INR1,000bn of restructured assets in the banking system in the next five months. These 500 corporates had a balance sheet domestic currency debt of INR28,760bn at FYE14.

The agency expects banks to consider taking a decisive action on their corporate accounts, which may have been servicing their debt with some delay, as the process of the Reserve Bank of India's calibrated withdrawal of regulatory forbearance peaks up speed from 1 April 2015. Within the top 500 corporate borrowers, 83 corporates, with outstanding domestic currency debt of INR2,431bn at FYE14), have not been publicly tagged as financially distressed. This is despite the companies having severely stretch credit metrics and no strong parent.

 

If some of these corporates are unable to generate significant cash flow or infuse significant equity in the near term, they may be identified by their lenders for restructuring pursuant to RBI guidelines issued during 21 October 2014 and 30 May 2013.

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