Companies need $10 Billion for debt re-financing

Chennai: To ensure better cash flow and easier debt obligation, Indian companies will require around $10 billion for debt re-financing. "Companies only consider refinancing, if the potential for a substantial cost savings exists, or if there is a need to extend the loan due to weak cash flow or other non-recurring commitments," said a senior investment banker.

As per a report in Times of India, a decline in the earnings of certain companies would trigger the refinancing requirements among them also. The companies which will have a higher need of the refinancing over the next 18 months include Hindalco Industries ( 15,400 crore), Reliance Industries ( 6,200 crore), Tata Steel (Rs 5,500 crore), Bharti Airtel (Rs 2,000 crore) and Reliance Communications (Rs 1,900 crore), data from J P Morgan shows. Infact, 80 percent of the debt re-financing will be accounted by the half of the companies of Sensex

However, in a cautioning tone, Bharat Iyer, analyst with J P Morgan India says, "Given the turmoil in the credit markets, we believe it is also necessary to look at refinancing / rollover risks over the immediate term. At the systemic level, debt to be re-financed over the next 18 months appears manageable at 13 percent of total borrowings. Sectors that appear to have relatively higher risk on this variable are materials, consumer discretionary and real estate."