Indian infrastructure builder Lanco Infratech Ltd has started discussion with its bankers to restructure debt worth 90 billion rupees ($1.5 billion) as a weak economy takes a toll, the Business Standard newspaper reported on Saturday.
If the process is approved by lenders, Lanco would be the second debt-laden company to go for major loan restructuring in the last year after lenders to wind turbine maker Suzlon Energy in November agreed to restructure about 110 billion rupees of its debt.
Lanco, which produces power and builds roads, and residential and commercial buildings in India, is looking to restructure a part of its debt after its attempts to sell some assets failed, the newspaper reported, citing unidentified bankers.
The company, which acquired Australia's Griffin Coal Mining Co for about $760 million in 2011, is exploring the option, a Lanco spokesman told Reuters, adding the possible process would not impact any of its units including the Australian business. He declined to give details.
Lanco, which had total debt of 336 billion rupees, as of the end of March, posted losses in the last two financial years, as the weak Indian economy, growing at its slowest in a decade, hit infrastructure investment.
Banks bring cases to the so-called corporate debt restructuring process to negotiate relaxed repayment terms with struggling borrowers.
"We told the company that something needed to be done about the huge debt, as it had exhausted all its options," a senior state-run bank official was quoted in the Business Standard report as saying about the possible Lanco restructuring. Project bottlenecks, largely because of problems in acquiring land and high funding costs, have also sapped investment in the infrastructure industry in Asia's third-largest economy.
Reflecting the poor economic climate, the earnings outlook of many mid-sized and debt-laden Indian infrastructure builders such as Jaiprakash Associates Ltd and GMR Infrastructure Ltd has deteriorated. Many lenders have expressed worry about loans to the power, commercial real estate, construction, aviation, textile and metals sectors, which are among those hardest-hit by slowing growth and sluggish policymaking that has deterred investment. ($1=59 rupees)