HCC and Lanco top list of risk in servicing debt

Bank loans to infra firms have grown at 31% a year and as of today the debt of 14 companies stands at Rs 3.8 lakh crore

Hindustan Construction Company and Lanco Infratech carry the highest risk among Indian infrastructure companies in terms of servicing their existing debt, says global investment banking firm Goldman Sachs which has analysed projects of 11 infrastructure companies in its report.

The banking sector’s exposure to infrastructure companies has been a cause of concern recently due to their high level of leverage and issues of fuel (coal & gas) availability. Lending to the sector grew at an annual rate of 31 per cent in the last eight years and now there is Rs 3.8 lakh crore of debt on 14 Indian infrastructure companies. Now these loans account for  4.8 to 18.6 per cent of loan exposure at Indian banks.

The bank estimates that 25 per cent of the companies analysed are under high risk and it believes that financiers with higher proportion of project loans in infra sector such as IDFC, Axis Bank, ICICI Bank and some public sector banks are likely to be adversely impacted.

“The perceived riskiness of lending to infra firms is likely far worse than reality, and we view coal availability and near-term liquidity issues as more important risks than leverage,” said Tabassum Inamdar, an analyst with the bank in the report.

However, the banks sees less risk of write-offs and higher risk of restructuring in the short and medium term. While the huge supply demand gap in the power sector is likely to drive asset values, the road projects having concession periods exceeding debt periods is expected to help the infrastructure companies. These companies can also use funds or profits from stronger projects to support weaker ones in the interim, believes Goldman Sachs.

Adani Enterprises and GMR Infrastructure are the other companies where the banks sees medium or moderate level of risk in servicing the debt.