NEW DELHI: Bank loans for India's top 100corporate houses are due for refinancing in the next 12-15 months; and the amount is estimated between Rs 1.9 lakh crore and Rs 2.1 lakh crore, according to India Ratings & Research, a Fitch group company.
These companies are from the non-financial and non-public space, the ratings agency said in a report on Thursday.
This amount is around 27-29 per cent of the aggregate net worth of the banking systemas at the end of FY13 and about 50 per cent of this refinancing amount, equivalent to 13 per cent of the banking system net worth as of FY13; and may present a significant underwriting challenge to bankers under the prevailing macroeconomic situation.
Around 24 per cent of the refinancing requirement is attributed to the 20 companies already in distress. While another 26 per cent of the refinancing requirement, attributed to 20 corporates, belongs to a category which Ind-Ra has termed as elevatedrefinancing risk (ERR).
Companies at ERR have weak credit metrics. Generally, as a group, their asset coverage ratios are low and financial flexibility of the promoter is also limited.
Under normal market conditions, they should be able to refinance at a high cost or with stringent covenants. However, this group may face significant challenges in debt refinancing during stressed market conditions, says the report.
About 34 corporates have refinancing risks which are manageable. Of these, 12 accounting for 27 per cent of the refinancing requirement will be able to refinance debt at a reasonable cost even under stressed market conditions. Ind-Ra has termed this category as high ease of refinancing (HER).
The other 22 corporates accounting for 23 per cent of the refinancing amount will also be able to refinance debt but with moderate ease. This has been referred to as moderate ease of refinancing (MER). However, they may have to bear a high cost, especially under stressed market conditions.
While driven possibly by credit rationing (at the bankers' end), banks' exposure to the MER and ERR group has grown at a much more muted level.
India Rating is of the view that while the cautious approach adopted by bankers has an intuitive explanation, the banking system may face the dilemma that if refinancing decisions are not taken promptly (when required), some of the large-value loans belonging to the ERR category may become distressed
Also, some corporates, particularly those with a low asset cover, may face underwriting challenges. Further, given the low interest coverage of the corporates in the ERR category, a higher interest rate may affect their debt servicing ability.
(The above report is compiled with inputs from India Ratings)
These companies are from the non-financial and non-public space, the ratings agency said in a report on Thursday.
This amount is around 27-29 per cent of the aggregate net worth of the banking systemas at the end of FY13 and about 50 per cent of this refinancing amount, equivalent to 13 per cent of the banking system net worth as of FY13; and may present a significant underwriting challenge to bankers under the prevailing macroeconomic situation.
Around 24 per cent of the refinancing requirement is attributed to the 20 companies already in distress. While another 26 per cent of the refinancing requirement, attributed to 20 corporates, belongs to a category which Ind-Ra has termed as elevatedrefinancing risk (ERR).
Companies at ERR have weak credit metrics. Generally, as a group, their asset coverage ratios are low and financial flexibility of the promoter is also limited.
Under normal market conditions, they should be able to refinance at a high cost or with stringent covenants. However, this group may face significant challenges in debt refinancing during stressed market conditions, says the report.
About 34 corporates have refinancing risks which are manageable. Of these, 12 accounting for 27 per cent of the refinancing requirement will be able to refinance debt at a reasonable cost even under stressed market conditions. Ind-Ra has termed this category as high ease of refinancing (HER).
The other 22 corporates accounting for 23 per cent of the refinancing amount will also be able to refinance debt but with moderate ease. This has been referred to as moderate ease of refinancing (MER). However, they may have to bear a high cost, especially under stressed market conditions.
While driven possibly by credit rationing (at the bankers' end), banks' exposure to the MER and ERR group has grown at a much more muted level.
India Rating is of the view that while the cautious approach adopted by bankers has an intuitive explanation, the banking system may face the dilemma that if refinancing decisions are not taken promptly (when required), some of the large-value loans belonging to the ERR category may become distressed
Also, some corporates, particularly those with a low asset cover, may face underwriting challenges. Further, given the low interest coverage of the corporates in the ERR category, a higher interest rate may affect their debt servicing ability.
(The above report is compiled with inputs from India Ratings)
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