India Inc plans Rs 2 lakh crore asset sale to cut debt
Mumbai: With increasing pressure from banks to repay some of its debt, Indian corporates are expected to sell assets worth up to Rs 2 lakh crore to shed a part of their outstanding debt of Rs 10 lakh crore.
“We estimate that nearly Rs 2 lakh crore of asset sales are in the pipeline or already completed by debt-ridden companies having a debt exposure of around Rs 10 lakh crore,” the economic research wing of SBI said in a note. In 2015, the SBI arm said around 270 companies have reported a decline in debt by Rs 47,813 crore.
The note said top 10 corporates alone owe Rs 5 lakh crore to banks, which may force them to sell assets of up to Rs 2 lakh crore, adding that this will have a positive impact on banks’ balance sheets. According to Credit Suisse, this list of top 10 debt-laden groups include Anil Ambani’s Reliance Group, Lanco Group, Jaypee Group, GMR Group, Videocon Group, GVK Group, Essar Group, Adani Group, JSW Group and Vedanta Group.
Among the factors forcing companies to sell their assets are pressure from banks, inability to raise capital or further debt and falling profits. Anil Ambani’s Reliance Group, which owes nearly Rs 1.15 lakh crore in debt as on September 2015, plans to raise Rs 50,000 crore by selling its telecom towers, cement, road assets, etc. It had already sold some of its assets to pare its debt by Rs 16,630 crore. It plans to sell its tower business and optic fibre network to raise Rs 39,828 crore and Rs 9,000 crore from selling all its road projects.
Lanco Group has already sold its Udupi plant for Rs 6,300 crore and it plans to sell its stake in Rs 25,000 crore worth of its power assets, which can help retire a debt of about Rs 18,000 crore.
According to Mr Kunj Bansal, CIO, Centrum Wealth, the Jaypee Gro-up has sold two hydro power plants for Rs 9,200 crore, while Jaiprakash Associates has agreed to sell some of its cement business for Rs 15,900 crore.
The GMR Group, which owes Rs 43,000 crore, has either raised or is in the process of raising over Rs 6,000 crore to cut its debt. Suzlon sold its German subsidiary Senvion to private equity company Centerbridge Partners for Rs 7,200 crore.
Even Bharti Airtel sold 2.91 per cent of its equity in Airtel Infratel in a deal worth Rs 1,925 crore sold 8,300 mobile towers in Africa for Rs 11,000 crore. Jindal Steel and Power sold its 1,000 MW thermal power plant to JSW to raise Rs 4,000 crore. GVK sold its stake in Bengaluru airport to raise Rs 2,149 crore to pare its debt. Tata Steel sold its long-product Scunthorpe steel plant and is in the process of selling other factories in Britain to cut its huge losses.