With bankers forcing companies to sell non-core assets to tide over bad debts, the economic research wing of SBI today said it expects asset sales of up to Rs 2 trillion by Indian Industry as part of the clean-up process.
“We estimate that nearly Rs 2 lakh crore of asset sales are in the pipeline/already completed by debt-ridden companies having a debt exposure of around Rs 10 lakh crore,” it said in a note.
At least a tenth of the total debt sales should go through the listing route, it said, adding that cash-rich conservative corporates are finding value in such companies.
It also cited recent happenings where companies like Sanghi Industries, Indo Count Industries, Ginni Filaments and Haldia Petrochemicals have exited the corporate debt restructuring process, with players like Ultratech, Piramal and promoters of Sun Pharma being the saviors.
About 270 companies reported decline in debt by Rs 47,813 crore in 2015, it said.
SBI research note also cited the case of debt-laden Lanco Group’s efforts to lessen debt through asset sales, including the Udupi plant sale in 2015-16 for Rs 6,300 crore, and also efforts to exit power assets of Rs 25,000 crore, which can help retire debt of about Rs 18,000 crore.
More companies from high-debt sectors like power, infra, steel and realty will be forced to go for accelerated asset sale in the hope of staying afloat until better times return, it said.
Additionally, foreign companies are also bringing in investments to use this opportunity either to establish or consolidate their presence in Indian markets, it said.
The note said top 10 corporates alone owe Rs 5 trillion to banks, which may force them to sell assets of up to Rs 2 trillion, it said, adding that this will have a positive impact on banks’ balance sheets.
“We, however, believe credit growth is unlikely to revive materially in near term as demand is still significantly a laggard in the system,” it said.