Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

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

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(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!

Read the latest Market Commentary


What else is happening in the markets today? Dig in...

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

1 Responses to "Will this resurrect debt-ridden Infra cos?"

DrHA!

Mar 28, 2016

The flow of cash to the debt ridden companies is more important than just setting up Infrastructure Investment Trusts. Then the resurrection of the Infra cos will follow and create jobs for many.

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

Views on News

Top 5 Recent IPO Developments You Should Know (Views On News)

May 12, 2021

So far in 2021, IPOs in India have raised nearly US$ 3 bn, the best start to the year since 2018.

How Did Mindtree Perform in Q4FY21? (Company Info)

Apr 20, 2021

Here's the rundown on the company's latest quarterly results.

Parag Parikh Conservative Hybrid Fund: Should You Invest in Higher Debt Allocation? (Outside View)

May 14, 2021

PersonalFN analyses the features of Parag Parikh Conservative Hybrid Fund and explains the potential this fund has to offer to its investors.

Die Hard 4.0 Redux? (Fast Profits Daily)

May 14, 2021

A Hollywood style cyber-attack has caused shockwaves across financial markets.

What Godrej Consumer's 22% Single-Day Gain Tells About My Blueprint (Profit Hunter)

May 14, 2021

The company's FY21 earnings performance turned out better than my estimates but...

More Views on News

Most Popular

My Secret to Find Breakthrough Stocks (Fast Profits Daily)

May 7, 2021

I've used this trading technique for many years with great success. I'm sharing it with you today.

Are the Stock Markets Deaf to Covid Agony? (Profit Hunter)

May 6, 2021

Why are markets discounting the economic impact of Covid?

The Worst Sector in the Market (Fast Profits Daily)

May 11, 2021

The worst sector in the stock market according to the charts.

The Key to Profit from India's EV Revolution (Profit Hunter)

May 7, 2021

Stocks you must consider investing in before buying your first electric vehicle.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


May 14, 2021 03:37 PM

MARKET STATS