It would be interesting to know how some of the companies grew by leaps and bounds in past few years and announced monster sized projects and expansion, be it in Steel or Power or other infrastructure sectors. The stocks used to go up on expansion plans without bothering about how those massive projects going to be funded.
Companies lobbied PSU banks top bosses and secured loans for their over ambitious projects without putting substantial guarantees. The money owed by the top 10 groups to banks is close to Rs 5,40,000 crore – up five-fold in five years. Wonder what the banks’ loan officers were thinking when they allowed this to happen.
Now everybody is suffering be it equity investors or the loan providers. The stocks of some of these companies have crashed 90% or more and the companies are unable to service their debts due to lack of cash flows.
There is going to be substantial stress on both banks and companies in months to come which will have severe impact on India's growth story. It would be god's grace if we can grow more than 6% annually in Fy - 13 to Fy - 15.
Just for the reference, following are the debt situation of some of the top infrastructure companies in India.
Essar group (Rs 93,800 crore)
Vedanta (Rs 93,500 crore)
Reliance (Rs 86,700 crore)
Adani (Rs 69,500 crore)
Jaypee (Rs 45,400 crore)
JSW (Rs 40,200 crore)
GMR (Rs 32,900 crore)
Lanco (Rs 29,300 crore)
Videocon (Rs 27,300 crore)
GVK (Rs 21,000 crore)