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Market Meltdown Hits Hyderabad Infra Companies
Posted by Pradeep Sadanapalli | November 1, 2008 | 1,513 views
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Loading ...The market turmoil has hit Hyderabad infrastructure industry like never before. The valuations of companies have touched historic lows and thereby substantially eroding their ability to raise capital.
Infra shudders in the last six months
Stocks decline of various companies are as below.
GMR Infra 68.3%
GVK Power 75%
Lanco Infratech 77%
IVRCL 80%
Nagarjuna 70%
In the last six months alone, the stock prices of top five Hyderabad-based infrastructure companies have nose-dived on an average of over 75%. Many infrastructure companies are forced to defer fund raising plans.
GVK Power and Infra Limited which planned to offload 20% equity stake had to drop its plan owing to tough market conditions. The Rs 243.5 crore private equity deal between Nagarjuna Constructions company and Blackstone Group is also shaky. Blackstone had offered 9.11 million warrants at the equivalent Rs 225 a share. However during the 14-month delay at foreign investment promotion board, NCC share dropped by 70% and is now trading at Rs 62.85 on BSE.
All these developments are expected to significantly affect the capex plans and aggressive bidding nature which characterised a Hyderabad-based infrastructure company.
E Sudhir Reddy, CMD, IVRCL Infra & Projects said, “I guess we need to take it on stride and wait and hope for markets to improve. Personally at IVRCL, we are not looking to raise any such capital. Probably we are looking at convertible and non convertible debentures which have shelf life.”
But experts paint a grim picture. They say infrastructure is still risky given high interest rates and bank’s turning cautious on projects with risk exposure.
Ganeshram Jayaraman, Senior Research Analyst-Infrastructure, Spark Capital said, “Infrastructure company have lost their share almost by 90% and still don’t see anyone buying them, the underlying risks of many of these projects have changed materially. We see cost of capital has risen substantially vis-Ã -vis the cost of debt, which many people are borrowing. The expected IRRs are not attractive at all.”
Most companies have started to optimise costs while improving operational efficiency. The only good news for Hyderabad companies is that they are sitting pretty on work orders for next two years. Now with increasing capital costs and non-availability of debt, companies here are increasingly looking at external commercial borrowings and convertible debentures.
Despite the concerns about raising the capital through debt or equity - Hyderabad based infra companies are optimistic about India infrastructure growth story.
SOURCES:
Money Control
Topics: Business News, Real Estate |
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