Saturday, September 25, 2021

Eleven stocks, $14 billion erased: India’s debt woes in charts

By Ameya Karve and Divya Patil

A year after a rare default in Indias credit market led to its mini-..

By admin , in Markets , at June 23, 2019

By Ameya Karve and Divya Patil

A year after a rare default in Indias credit market led to its mini-Lehman moment, several shadow banks in the country, its oldest surviving private airline and the parent company of its biggest television broadcaster are still reeling.

The fear which erased more than 1 trillion rupees ($14.4 billion) in market capitalization of the 11 worst-hit firms is refusing to ebb.

A custom index of shares of these 11 companies — ranging from Dewan Housing Finance Corporation to Reliance Capital — has slumped 54 per cent since June compared with the S&P BSE Sensexs 12 per cent advance.

Risk aversion in the credit market that followed the collapse of Infrastructure Leasing & Financial Services roared back this month after Dewan Housings rating was cut to default. Many of these junk-rated borrowers have turned untouchable in credit markets curtailing their ability to refinance outstanding bonds of 2.03 trillion rupees.

Money is not cheap for non-bank lenders outside this group of eleven either as financing costs surge. For instance, to issue a two-year paper even a top rated shadow lender has to pay a premium of 162 basis points over sovereign debt with a similar maturity. The spread has widened by 50 basis points in the last 12 months, according to data compiled by Bloomberg.

Rollover risks for outstanding borrowings are rising as these companies could only raise less than one-seventh of debt they did in the year before. Founders of most of these companies are selling businesses to tide over the crunch.

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The impact of the credit crisis is spreading. Local asset managers such as HDFC Asset Management Company, which have holdings of some of these stressed debt paRead More – Source


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