Debt Obligations: Construction, IT And Metal Companies Facing The Heat

To overcome this issue some of the analysts have suggest equity issuances to retire debt could help. Sandeep Singal, co-head of institutional equities at Emkay Global Financial Services also said that some of the above mentioned measures might pick up in as little as two quarters if implemented.  He further added that, “The whole outlook has changed and there is greater investor appetite. One could see 20,000-25,000 crore in fund raising is in the offing, with some of it being used to retire debt. Chemicals and building materials are among the likely sectors.”

Lalit Nambiar, fund manager at UTI Asset Management Company said, “Most of the affected companies are infrastructure ones, also facing cash flow problems. They can get out of it if projects are implemented. Alternatively, they can get in additional equity or the banks that have lent them the money could look to convert their positions into equity.” He further exclaimed that, if banks did so, this would indirectly help other businesses as well. “This frees banks to lend elsewhere and the additional liquidity will help the business cycle.”

The report added that, “While most large corporates have been highlighting plans for de-leveraging, progress on this front has been relatively slow for some of the large announced deals; the cash inflow is in the first quarter of FY15.

For the largest 50 borrowers with IC less than one, debt levels went up by seven percent in FY14 even as Ebitda (operating earnings) dropped by nine percent. Consequently, debt and Ebitda multiples have deteriorated to 14.6x from 12.3x.”
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