Infrastructure developer Punj Lloyd Ltd, set up in its present avatar in 1988, had grown quickly into a $2.6-billion business house within two decades.
The group has been at the forefront of tapping international opportunities, helping it weather even the most sluggish phases in the Indian infrastructure space.
However, over the last two to three years, the group’s fortunes have hit the rough seas.
From a debt to equity ratio of 1.6 in the 2011-12 fiscal, the company’s debt to equity ratio ballooned to 6.3 by end 2014-15.
“The increase in debt was due to our requirement for implementation of infrastructure projects which are since then on-stream.
“The economic conditions have contributed in affecting the company’s cash flow, owing to non-realisation of receivables and relatively slow order booking in a few verticals and geographies.
“With the money being held up for long periods, the working capital cycle of the company was stretched, resulting in increase in debt,” a Punj Lloyd spokesperson told BusinessLine .
Analysts do expect a revival in Punj Lloyd’s fortunes in the not-too-distant future.
“I think the company has been very strict about its balance sheet health. From 2012-13 onwards when its debt to equity ratio crossed 2, they have actively looked to reduce debt by getting out of non-core businesses,” said a Mumbai-based analyst with a foreign brokerage firm. Despite the debt, Punj Lloyd’s reputation for completing projects with complete quality control has remained intact, according to industry watchers and analysts.
“Punj Lloyd was amongst the first infrastructure companies in India to pick up projects abroad. They have piled up debt, but they generally are known to hand over the projects on time. In fact, maintaining this reputation over since the 2011 slowdown in the Indian economy would be one of the big contributing factors to their debt increasing,” a consultant with a global audit and consultancy firm said. “There would be many EPC companies who would just stall a project if the client was not in position to make payments. But one has never heard such things come from the Punj Lloyd group.”
Punj Lloyd Ltd’s long-term and short-term borrowings as on September 30, 2015 stood at ₹5,056.43 crore.
In terms of debt at other infrastructure firms, this might not have reached alarming levels yet, but Chairman Atul Punj wants the company to reduce debt and get back to a healthy balance sheet like in 2011.
In 2015, the company successfully raised close to ₹700 crore by selling its stake in the super speciality hospital Medanta to Temasek Holdings Pte Ltd.
In August, the company’s management told analysts it is in the process of tying up a sale of some barges for $67.5 million (₹450 crore).
“The company has been making all efforts to reduce debt, starting with exiting from all non-core assets such as Medanta, where we sold our stake to Temasek last year.
“The money realised was utilised towards debt reduction. We are following a two-pronged approach to reduce our debt, mainly monetising of assets and focusing on claims settlements,” a Punj Lloyd spokesperson said.
According to its latest statement of assets and liabilities released on September 30, 2015, the company still has about ₹6,109.69 crore of unbilled revenues (work in progress). Its trade receivables stood at ₹1,644.12 crore.
While Punj Lloyd has faced some pressures in servicing the debt, its lenders have stood by the company.
“The company has seen some relief with the corrective action plan through the joint lenders forum, which has led to reduction in weight of interest charged. We have been successful in running our operations in the most efficient manner,” the spokesperson added.
However, no one is yet hazarding a guess on whether its efforts will help revive Punj Lloyd’s share price, which is currently languishing at around ₹23 per share.