Next worry for markets: refinancing at mid-sized firms

Next worry for markets: refinancing at mid-sized firms

The next shoe to fall in India’s debt market crisis could be refinancing difficulties at a clutch of mid-sized companies, DH reports in this exclusive

Among entities that are facing a problem in refinancing their debt are financial sector players including a private sector bank and a fintech outfit, a chemicals producer and a couple of fast-moving consumer goods manufacturers. Reuters photo for representation

The next shoe to fall in India’s debt market crisis could be refinancing difficulties at a clutch of mid-sized companies.

After the ructions at non-banking finance companies (NBFCs), market watchers say that about Rs 2 lakh crore that is coming up for refinancing – companies having to replace costly debt with cheaper alternatives -- raises the risk of default among some of the companies.

According to four sources in the know, among entities that are facing a problem in refinancing their debt are financial sector players including a private sector bank and a fintech outfit, a chemicals producer and a couple of fast-moving consumer goods manufacturers among others.

“If you have high debt and high degree of re-financing requirements, then there could be issues. If the level of debt in the companies is high, then the market would be uncomfortable. Among the sectors I track, we are seeing a significant challenge in NBFCs who are focused mainly on real estate,” said Sanjay Agarwal, Senior Director, Care Ratings.

Market insiders also fear that a blue-chip group, which has many of its bonds maturing in a few months, will face financial turbulence as it has borrowings nearly 100 times its equity share capital.

“If they get their refinance done, things would not be bad for them. However, banks and capital markets are getting skeptical because of the degree of leveraging,” one of the sources said.
 
A diversified conglomerate with an interest in housing finance has been trying to place bond issues with mutual fund houses in a bid to tide over financing. On the market’s watch list, too, are a Kolkata-based mid-sized financial company and a private sector lender with a low CASA (Current Account Savings Account) ratio, a measure of its ability to lend.