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M&As to pick up once moratorium ends

By Dev Chatterjee
August 10, 2020 15:31 IST
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Several airlines, hotels, travel and tourism companies are expected to move their applications for one-time restructuring as soon as the moratorium ends.

Merger & acquisition

Illustration: Uttam Ghosh/Rediff.com

With the moratorium announced by the Reserve Bank of India (RBI) ending on August 31, and the cash flows of companies expected to take more time to recover, a large number of firms are planning to take advantage of the RBI’s one-time debt restructuring plan.

Some companies will sell assets to repay loans, and mergers and acquisitions (M&As) will pick up substantially among Indian firms, say bankers.

 

M&A transactions announced till July-end by India Inc was down to only $56.73 billion (thanks mainly to Jio deals) as compared to $88.8 billion in the corresponding period last year.

Several airlines, hotels, travel and tourism companies are expected to move their applications for one-time restructuring as soon as the moratorium ends.

These companies will look at selling assets, say bankers.

Rating agency CRISIL sees the following scenarios evolving among the Indian companies for rating action:

  • If the restructuring application is approved by the lenders before the due date of repayment, the company’s credit profile is unlikely to face any sharp rating action
  • If the restructuring application is approved by the lenders before the due date of repayment, the company’s credit profile is unlikely to face any sharp rating action
  • If the restructuring application is made before the due date, but the lenders have reservati­ons against the application, though the final decision is yet to be formalised, the ratings could be downgraded and also placed on “watch negative”
  • If the restructuring application is made after the due date and repayments are missed in the interim, the ratings could be downgraded to default category.
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Dev Chatterjee
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