Delays in obtaining statutory approvals and inability to tie up funds are pushing an increasing number of infrastructure companies to restructure debt.
Currently, companies in this segment account for over a tenth of the total debt being recast by the banking industry through the corporate debt restructuring (CDR) route.
As of June 2013, these companies, mostly engineering, procurement and construction (EPC) contractors executing road, bridges and irrigation projects, accounted for Rs 34,676 crore or nearly 14 per cent of the Rs 2.50-lakh crore total debt being recast by the cell.
As of March 2013, such projects accounted for 9.57 per cent of the total debt of Rs 2.29-lakh crore.
Among EPC contractors, Gammon India’s debt exposure of about Rs 13,000 crore has been approved by lenders for restructuring under the CDR cell.
Lanco Infratech’s Rs 7,500-crore debt exposure too has been referred to the cell, it is learnt.
The iron and steel segment continues to top the list of sectors seeking a debt rejig, accounting for 21.41 per cent of the total debt as of June 2013.
Infrastructure figures next on the list. Problems associated with land acquisition and forest/environment clearances, among others, are hindering the implementation of infrastructure projects, and delaying servicing of loans.
Policy, funding issues
Bankers attribute the infrastructure sector problems partly to policy hiccups, which are not in the control of promoters, and partly to funding problems.
“Many groups took up a number of projects in the hope that as and when some of them come on stream, they will be able to either sell those projects or securitise the receivables and get funds,” says a top public sector banker.
“The groups were also hoping to get funds from the private equity space or from the market. Once this materialised, they planned to get the funds into the main holding company and take up new projects.”
However, these projects did not start on time, resulting in the promoters not being able to sell their projects or securitise their receivables.
Due to policy bottlenecks, private equity players shied away from investing in the projects. And, the promoters could not tap the equity market as it was not conducive for fund raising.
So, the infrastructure project holding companies kept taking on more debt, resulting in their debt-equity ratio becoming skewed.
For many firms, the ratio has gone up and this is not sustainable, said another banker.