Many plan to take corporate debt restructuring route

Infrastructure sector stocks have taken a heavy beating in the markets with several of them, including large diversified firms GMR Infrastructure, GVK Power Infrastructure, Lanco Infratech, Ramky Infrastructure and Punj Lloyd touching new lows on Tuesday.

These companies are facing a slew of problems - tough business environment, difficulty in project execution, high interest rates chipping away at their margins, liquidity crunch and low sentiment.

Except NCC Ltd, which was up 0.44 per cent at Rs 22.90, other infrastructure companies fell sharply. Madhucon Projects slumped 9.66 per cent at Rs 10.75 while Gammon India eased 2.5 per cent at Rs 13.60. IVRCL at Rs 12.05 was down 3.2 per cent and Gayatri Projects tumbled 5.5 per cent to Rs 58.30.

Restructuring woes

Sentiments have been quite weak in the past couple of weeks with some of the companies, including Lanco Infratech Ltd, seeking to restructure their debts. The market is abuzz with rumours that some more companies may have to take the corporate debt restructuring route to tide over liquidity concerns.

Binu Joseph, Vice-President, JRG Securities, said lower-than-expected performance of L&T and some companies potentially heading for CDR have dampened investor sentiments. “Banks have indicated that they are cautious about their portfolios and this has further added to infra companies’ woes,” he added.

FIIs wait & watch

With the capital markets remaining unfavourable, foreign investors are adopting a wait-and-watch mode. They are looking for the Indian economy to show signs of a turnaround, even as efforts by some companies to divest stakes to reduce debt and free up equity have not materialised.

Barring companies such as GMR and GVK, not many have managed to divest stakes. This has led to further pressure on liquidity in these companies, whose order book flows have also slowed down.

In spite of some of the measures announced by the Government to set right the sector and accord top priority to address their concerns, there has been a lag between assurance and actual implementation.

Even the rate cuts announced in the past by the RBI have not been fully passed on to these companies. All these have piled up severe pressure on these companies.

(This article was published on July 30, 2013)
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