Mumbai: GMR Infrastructure, Lanco and GVK are on a bumpy road with lenders and investors who are tightening purse strings in a slowing economy. As a strategy, a GMR spokesperson said the company was moving more into brownfield projects to secure early revenue stream and better cash flow and was also anticipating a turnaround in tariff at Delhi International Airport. A few road and power projects would be commissioned which would improve EBITDA and revenue, a spokesperson said. Investors are refusing to touch infrastructure companies, fearing a wipe-out after most of these stocks crashed 80 per cent in some cases were the market value of the company is lower than their annual revenue.
Everyone agrees that India needs infrastructure such as roads and utilities and these companies are better positioned with their experience, but the debt they have accumulated over the years is an albatross around their neck. When the infrastructure fad was running its course, companies more than tripled their debt bidding for projects a lot bigger than what their equity had supported. Indiscriminate lending by banks, prodded by the government, is back to haunt these companies as most lenders have reached their limits and are staring at defaults. Lanco, a power producer and a contractor, recently defaulted on its Rs 90 crore payment to banks.
In the five-years between 2007 and 2011, debt of GMR Infra, which operates the New Delhi airport, jumped 6.7 times. BGR Energy and IVRCL, a contractor for road and water projects, had a 5.4-fold jump in their debt. GVK Power, which runs the Mumbai airport, saw its debt climb 3.59 times in the same period.
30/01/12 TravelBizMonitor
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