Helping You Build Wealth With Honest Research
Since 1996. Try Now

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Will this resurrect debt-ridden Infra cos?
Mon, 28 Mar Pre-Open

Infrastructure companies continue to be saddled with high debt on account of delays in project completion. Infrastructure Investment Trusts (InvIT) seems to have come as a big relief for the them. InvITs enables infrastructure companies to exit or dilute their stake in the completed projects. Take the instance of a road project. A company named 'X' had been awarded the project to build the Mumbai-Pune expressway. Now, once the roads were built, the company had to wait for significant period of time to recover the costs in the form of tolls. However, with InvITs, the parent company can easily exit the project and cash in on his stake. The cash generated can be utilized by the infrastructure company to invest in new projects as well as to repay debt.

The stretched balance sheets of infra companies have led to a sharp rise in stressed advances for the banking industry.

As stated in the RBI Financial Stability Report released in December 2015:

Five sub-sectors viz. mining, iron & steel, textiles, infrastructure and aviation, which together constituted 24.2 per cent of the total advances of scheduled commercial banks as of June 2015, contributed to 53.0 per cent of the total stressed advances.

What this means that one-fourth of the advances accounted for more than a majority of total stressed assets of the banks. But with Invits, infra companies will be able to repay debt and free up resources for future projects. This in-turn will boost their profitability on the back of lower finance costs. Further, it will also help bring down the bad loans of the banking industry.

IRB Infrastructure Developers will be the first company to get the regulatory approval to tap investors fund through the InvIT route. However, not just IRB but others in the infra sector such as GMR Infrastructure Ltd, IL&FS Transportation Networks Ltd and engineering giant Larsen and Toubro Ltd (L&T) have also lined up for monetizing their projects.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "Will this resurrect debt-ridden Infra cos?". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Agora Research Private Limited.

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Agora Research Private Limited (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.