Infra companies pay over $1 billion in finance, interest costs in first half of FY14

HYDERABAD: India's major 10 infrastructure companies have together paid out more than $1 billion towards finance and interest costs during the first half of fiscal, resulting in huge dents in margins in some cases.

L&T, Reliance Infrastructure, HCC, GMR, Lanco Infratech, IVRCL, Jaiprakash Associates, NCC, Gammon and Jaypee Infratech paid Rs 6,794 crore towards finance costs during April-September, as per their respective financial reports.

This a 29 per cent increase compared to the same period last fiscal when they had paid Rs 5,272 crore.

Market experts said the trend would continue in the second half of the financial year and the costs may even escalate if RBI decides to hike interest rates further.

Jagannadham Thunuguntla, Strategist and Head of Research, SMC Global Securities, said the overall economic slowdown was leading to high debt and interest burden on the sector.

Debt burden is a perennial problem for infrastructure companies in India as most players have taken up more projects than they can handle, he said.

"In that process the interest burden is hampering the operational performance. In some cases the debt is five times more than the market capitalisation of the company.

"It may take considerable time for these companies to come out of the situation," Thunuguntla said.

Since 2007, private companies have pumped about $225 billion into Indian infrastructure projects, with sometimes "disappointing" results. Some public-listed infrastructure firms have experienced severe share-price declines, a report titled `Infrastructure2013 (Global Priorities, Global Insights)' by Ernst and Young said.