Top firms face R1.4 lakh cr refinance risk: Ind-Ra

By: | Published: June 22, 2016 6:10 AM

The total debt outstanding in these two categories (stressed and ERR) is R11.8 lakh crore, or 42% of the total debt. “However, these two categories account for 66% of the total refinancing due in FY17,” the report said, adding that in FY16, these borrowers refinanced between R1.3 lakh crore and R1.5 lakh crore.

About half of the country’s top 500 corporate borrowers – whose total refinancing requirement is R1.4 lakh crore in FY17 – are either stressed or stand elevated risk of refinancing (ERR), ratings agency India Ratings & Research (Ind-RA) said on Tuesday.

The total debt outstanding in these two categories (stressed and ERR) is R11.8 lakh crore, or 42% of the total debt. “However, these two categories account for 66% of the total refinancing due in FY17,” the report said, adding that in FY16, these borrowers refinanced between R1.3 lakh crore and R1.5 lakh crore.
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One hundred and eight (108) entities have been classified under the high ease of refinancing (HER) category (31% of total debt and 7% of the total refinancing) and 152 entities in the medium ease of refinancing (MER) category (27% of total debt and 27% of the total refinancing).

The agency said it expects overall debt obligation (current maturing and interest) for FY17 to remain at the FY16 levels of R5.3 lakh crore owing to stable interest rates and stable working capital requirements coupled with low capex activities.

India Ratings has used five credit parameters to arrive at a refinancing category. The parameters are: EBITDA interest coverage for FY15 or FY16, trend in cash flow from operations during FY13-FY15, total asset coverage ratio, percentage of outstanding shares pledged and cash headroom.

“We believe that if the weak demand conditions persist in FY17, particularly in the stressed sectors such as infrastructure and construction, metal and mining, real estate, power, textile and shipping, corporates in the ERR category will be affected the most with risk of migrating to the stressed category,” it said.

While in the stressed category, 43% corporates belong to infrastructure and construction, and metals & mining sectors, and another 7% belong to sugar and pharma sectors each.

In the ERR category, 50% corporates primarily belong to the infrastructure and construction, metals & mining, real estate, textile and power.

According to the report, banks have been rationing credit, particularly to ERR category corporates. “The banking sector exposure to the ERR (FY15: 24.9%, FY12: 26.8%) and stressed (18.7%, 19.5%) groups has remained muted since FY12, while the exposure to the HER (31.2%, 29.7%) and MER (25.2%, 24%) categories has increased,” the report said.

Total domestic bank advances grew 9.4% Y-o-Y in FY15 and the total non-financial corporate consolidated bank debt of top borrowers grew 10% Y-o-Y in FY15 to R21 lakh crore (FY14: 21.6%) and was 32.1% of the total bank advances of R65.3 lakh crore.

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