GMR Infrastructure seeks loan recast under 5/25 scheme

The scheme allows banks to extend the repayment schedule of the loan to 25 years with an option to refinance the loans at the end of 5 years

GMR Infrastructure has joined a long list of Indian companies that have asked banks to restructure their loans under the 5/25 scheme as they are unable to meet their debt servicing commitments due to an economic slowdown.

Aimed at providing relief to the infrastructure sector, the 5/25 scheme allows banks to extend the repayment schedule of loans to 25 years with an option to refinance them at the end of five years. A slew of Indian companies setting up power, pipeline and road projects have sought extended repayment. The 5/25 scheme will help infrastructure companies repay their loans as the economy picks up and the projects start making money. An email sent to GMR Infrastructure did not elicit any response.

The company has Rs 42,201 crore of consolidated loans and its finance costs were Rs 3,571 crore in March. GMR Infrastructure’s revenue of Rs 11,087 crore failed to keep pace with its finance costs and it reported a loss of Rs 2,733 crore in 2013-14. In the last financial year, GMR Infrastructure raised Rs 1,402 crore through a rights issue that was used mainly to service debt. The loan recast was for part of the loan and not for the entire liability, said a banker.

GMR Infrastructure, like most of Indian infrastructure companies, was affected by a policy paralysis in the past two years of the United Progressive Alliance government. Billions of dollars of projects were stalled as the government delayed or stopped payment for construction. Many half-built projects now dot the country.

Shares lost 21 per cent of their value since January and 56 per cent in the past year against an 11 per cent rise in the Sensex. GMR Infrastructure is currently trading at Rs 14.23 a share.

GMR is not alone in seeking a bailout from the banks. Many other power companies have also sought the loan recast package from the banks. The Reserve Bank of India has also come out with new norms called the Strategic Debt Restructuring scheme which provides the lenders with the much needed strength to take over assets, if the current CDR schemes fail to bear enough results.

With the Indian government planning to give orders worth $300 billion in the next one year, the Indian infrastructure companies are hoping to get out of the financial mess by bagging these orders.