It is not just the rising interest and input costs and project delays that is hurting the realty companies, rather the mounting debt is the real cause of worry. As many of the companies are up against the mounting bad debt, their only hope is that the lenders will restructure loans. According to the estimates of ratings agency ICRA the lenders will have to restructure debt amounting to Rs 1 lakh crore over the next 12-18 months.
The need to soften the blow of the economic slowdown and control extent of slippages (loans turning into non-performing assets) is expected to drive corporate debt revamp.
The estimated amount is a combination of proposals that may be sent to corporate debt restructuring (CDR) forum and those dealt at the level of the banks.
The stress is really building up in road projects and real estate. Another ratings body, Fitch, recently downgraded the rating for loans to two toll projects, where IVRCL was the sponsor, from BBB- to B-. Kumarapalayam Tollways Ltd and Salem Tollways Ltd are facing financial stress due to lower-than-estimated traffic.
Ratings agency CARE downgraded long-term bank facilities of Mohali-based Taneja Developers and Infra Ltd from C to D. Delays in debt servicing and the continuing stretched liquidity profile due to additions into the land bank inventory at its existing projects site in Mohali were the main reasons for this.
The restructuring story does not end with only taking up fresh cases. Some viable units that were restructured before 2008 due to temporary cash flow problems are already showing signs of stress. They carry high risk to becoming NPAs.
State Bank of India’s portfolio of standard restructured assets was just over Rs 34,900 crore at the end of June.
