Mumbai: India Inc is expected to sell assets worth Rs 60,000 crore during the current fiscal to reduce their high level of debt and shore up their balance sheet. In the past 18 months, 21 firms have announced 36 deals to divest assets and sell equity to strategic partners to raise Rs 80,000 crore, which is nearly a fifth of their debt.
According to rating agency CRISIL, expected policy reforms and a buoyant capital market should lead to more such transactions. “Based on interactions, we expect firms to raise another Rs 60,000 crore at the very least in 2014-15,” the rating agency said.
During the early part of this decade, expansions and diversifications were funded primarily through debt. Over the past three years, the total debt of these 21 firms increased by nearly 50 per cent to Rs 4.4 lakh crore as on March 31, 2014.
However, a slowing economy and a rising interest rates meant operating profit stagnated at just 2 per cent during the period. Consequently, asset sales became necessary to cushion the pressure on balance sheets.
According to an analysis by the rating agency, nearly 60 per cent of the total divestment of assets was by firms operating in the infrastructure sector such as power, roads and Oil&Gas. Further, 60 per cent of the transaction value also relates to non –core sectors as well as overseas assets acquired during the economic upturn in a bid to diversify geographically.
With risk appetite improving, the rating agencies said that global investors have been seeking good quality Indian assets and were involved in the quarter of the transaction by value.
