Reduction of debt is akin to an obese person undergoing a bariatric surgery to not just lose the excessive weight but also to get healthy. Infrastructure companies have for long been adding up to their existing debts which is going out of control. Over the past five years the top 5 infra companies by market capitalisation have a combined debt to the tune of ₹1,93,633 crore or 120 per cent of their combined market capitalisation of ₹1,60,737 crore.
No wonder, they are in a dilemma on how to handle the huge debt that has piled up over the past 5 years. At the height of the infra boom in 2007, many of these companies had raised debts to fund their grand infra projects. However, since the economic crisis of 2008-09, they haven't recovered as yet.
Of concern are companies in the power sector that have taken the biggest blow from the crisis. This sector has been plagued by several problems such as delays in projects due to various political, environmental, land acquisition and feasibility issues. As if all this was not enough, they are now struggling to even service their loans, which is adding up to their existing loan baggage. All this has lead to companies having no choice other than selling their projects to repay the debt or going for equity infusion. Big infra companies have already started with massive sale of their various projects like GMR group, GVK, L&T, Jaypee Group, Nagarjuna and Lanco Infra tech as a part of restructuring strategy to wash off the big chunk of debt. Banks have also started pressurising the infra companies which may lead to more such companies joining the fray in the coming year.
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