Lanco Infratech Limited, which is into power, road and EPC (engineering, procurement, construction) projects, recently concluded a CDR facility worth ₹11,155 crore with a clutch of 25 lenders headed by IDBI. It includes restructured term loans, working capital and working capital term loans. The company is also increasing its authorised capital from ₹500 crore to ₹1,200 crore. The company had faced a liquidity crunch as the pace of project execution had slowed down.

“The debt would not have been an issue at all if the existing power plants were functioning at their optimum plant load factor and EPC works were on schedule,” said T Adi Babu, Chief Operating Officer, Finance. “But both thermal and gas-based power plants were impacted by inadequate fuel, leading to lower plant-load factors. EPC work was impacted due to delays in clearances.”

All this has meant that loan servicing continued without some projects functioning at their optimal level. With the capital markets drying up and private equity being wary, there were few options but to seek rescheduling of loans, Babu said. “The whole CDR process takes about 90 days as per norms and we managed to conclude it in that time. All the bankers were cooperative as they understand the market situation and know our track record,” he explained.

They also know that little improvements, such as better fuel linkages and improved gas supply, will help the company, he said. Dues from state electricity boards, too, have piled up to close to ₹3,000 crore. As these get addressed, things will turn around, said Babu.

IVRCL Limited

Engineering and construction company IVRCL Limited has approached the CDR cell and hopes to conclude the process before the end of the current financial year.

The company has already divested stakes in three of its road assets to TRIL, a Tata group entity, and is in the process of divesting some more BOT (build-operate-transfer) projects to lower its debt and free up equity for new projects. The BOT projects include a desalination plant in Chennai and a couple of road projects.

IVRCL has a debt of about ₹3,000 crore on a standalone basis and ₹6,000 crore on a consolidated basis. It is seeking to rejig its debt with SBI facilitating the process. Of the 25-plus banks, 10 account for 90 per cent of the loan. They have agreed to restructure the loans and the entire process is likely to be concluded by March end.

“The key issue for an infrastructure company today is liquidity to execute ongoing projects,” said R Balarami Reddy, Executive Director, Finance, IVRCL. “But cash flows have been impacted as the order book is not getting converted into turnover. The pace of implementation has been impacted.”

Slow execution of work (because of the regulatory environment) and high interest rates have seen IVRCL’s debt pile up and cash flows come down. More than ₹2,500 crore is also locked in BOT projects. In other words, debt is being serviced without adequate cash flows.

“Interest rates have risen from 8 to 8.5 per cent to 12.5 to 13.5 per cent in the last 30 to 36 months. The contracts we have do not permit similar escalation,” added Reddy.

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