Even as new reforms get rolled out and the economy sees an uptick, barring renewed inflationary risks, India Inc, particularly its debt-stressed companies, will continue to face an extremely tough year ahead. A rating agency report on Tuesday warned that 240 of the top 500 borrowers among Indian companies, listed and unlisted, will find it extremely difficult to re-finance their debt obligations arising in current financial year (FY17).
These 240 companies, according to India Ratings and Research, face debt obligations to the tune of Rs 2,28,000 crore in FY17, about 60 per cent of which they would have to resort to refinancing.
Of these, 83 firms, which were already in the stressed or default category, faced a debt obligation of Rs 1,01,000 crore in FY17. Their collective total outstanding debt stood at Rs 5,10,000 crore. The remaining 157 companies, which were in the elevated risk of refinancing category, faced debt obligations of Rs 1,27,000 crore in FY17, out of their collective outstanding debt of Rs 6,72,000 crore. Together, these 240 high-risk firms would need to seek refinancing to the extent of Rs 1,37,600 crore.
Siddhartha Khemka, head of research at Centrum Broking, said companies facing refinancing risks are likely to pay higher interest rates and provide more collateral. Interestingly, the India Ratings report noted “The median credit metrics for the elevated risk of refinancing (ERR) category have deteriorated over FY11-FY16 and public sector banks are rationing credit due to mounting losses and capital constraints.”
The rating agency conducted a sectoral break-up, which indicated “a significant concentration in leveraged sectors such as metal and mining, infrastructure and construction, oil and gas, power, real estate and telecom contributing 65 per cent to the total debt and 53 per cent to the total refinancing requirement.”