Bank loans worth an estimated Rs 1.9 lakh crore – Rs 2.1 lakh crore belonging to top 100 corporates (non-financial and non-public sector) are due for refinancing in the next 12-15 months, according to India Ratings and Research.
“This amount is around 27-29 per cent of the aggregate net worth of the banking system as at end-FY13, a report by India Ratings said.
About 50 per cent of this refinancing amount, equivalent to 13 per cent of the banking system net worth as on FY13, may present a significant underwriting challenge to bankers under the prevailing macroeconomic situation, the report added.
“The potentially low eagerness on the part of bankers may prove to be a challenge in debt refinancing to moderate ease of refinancing and elevated refinancing risk categories. While the cautious approach adopted by bankers has an intuitive explanation, the banking system may face the dilemma that if refinancing decisions are not taken promptly (when required), some of the large-value loans belonging to the elevated refinancing risk category may become distressed,” the report highlighted.
Further, among the top 100 corporates, those in the negligible refinancing risk, high ease of refinancing and moderate ease of refinancing categories have shown a reduced dependency on the Indian banking system, while the dependency of those in the elevated risk and stressed categories has broadly remained unchanged, it said.
Around 24 per cent of the refinancing requirement (about 4 - 5 per cent of the banking system net worth) is attributed to the 20 companies already in distress. While another 26 per cent of the refinancing requirement (attributed to 20 corporates) belongs to a category which India Ratings has termed as elevated risk. Companies in elevated risk have weak credit metrics.
According to the report, “About 34 corporates have refinancing risks which are manageable. Of these, 12 accounting for 27 per cent of the refinancing requirement will be able to refinance debt at a reasonable cost even under stressed market conditions. The other 22 corporates accounting for 23 per cent of the refinancing amount will also be able to refinance debt but with moderate ease. However, they may have to bear a high cost, especially under stressed market conditions.
Nearly 26 of the 100 top corporates considered have no significant refinancing exposure or are at negligible refinancing risk till FY15. They have moderate levels of debt maturing or are likely to have sufficient free cash flows to service the maturing debt.
Some corporates, particularly those with a low asset cover, may face underwriting challenges. Further, among the top 100 corporates, those in the negligible refinancing risk, high ease of refinancing and moderate ease of refinancing categories have shown a reduced dependency on the Indian banking system, while the dependency of those in the elevated risk and stressed categories has broadly remained unchanged.