240 companies can't repay Rs 1.40 lakh crore debt

In some more bad news for banks already ridden with large mounting bad debts, some 240 corporate entities have been identified as no longer capable of repaying a collective ₹1.40 lakh crore debt said a report by ratings agency India Ratings and Research.

Several banks are already said to be in a soup thanks to their indiscriminate lending to big business for 'mega-projects', and a new report released by India Ratings and Research casting an even gloomier picture. The report claims that even if the companies are put back on track, many may not have sufficient monies.

The rating agency, India Ratings, classified the corporation into four categories, after conducting a study spanning 500 business entities, depending on their refinancing requirements.

The study made a startling disclosure, namely that out of the 500 major corporate entities, 240 companies have reached such a dismal state that is almost no chance of loan repayment. The total of such loans adds up to a massive ₹1.40 lakh crore. 

As per the report, among the 240 entities, 157 can opt for refinancing of loans, which is considered a path to revival. But 83 companies are in such bad shape that their loans have become bad debts and at present they are not in a position to repay the loans. 

Rakesh Valecha, Head of Credit and Market Research, India Ratings, said that this estimate has been made considering factors like cash inflow, overall economic condition, fixed assets, redeemable shares of the company and other related financial facts. Valecha said that a whopping ₹5.1 lakh crore of debt came under the 'stressed' classification. Major sectors requiring total refinancing are shipping, infrastructure, metal, mining, power and real estate companies.

The prevailing condition is said to become worse next year, as the volume of loans that may be considered for refinancing may touch a new high at ₹6.7 lakh crore.