Free Press Journal

Non-productive assets raise cash flow recovery concern: report


Mumbai : Out of the top 500 corporate borrowers, 111 of them have held Rs 7.4 trillion of the overall debt of Rs 30.2 trillion at FYE16, says India Ratings and Research (Ind-Ra) report. It further states that it is unlikely for these companies to generate higher return on capital employed (ROCE) than weighted average cost of capital (WACC), even in a high economic growth scenario.

Attributing this scenario to an incremental build-up of relatively high non-productive assets during FY11-FY16, the agency added the credit metrics of these corporates are likely to marginally improve in the near term. The rating agency said corporates witnessed a decline in the proportion of their fixed assets to total assets to 52 per cent in FY16 from 71 per cent in FY11.

The reports also pointed out 85 corporates with relatively weak asset quality unlikely to revive. Banks exposed to such entities may find it difficult to fit these corporates into the Scheme for Sustainable Structuring of Stressed Assets (S4A).

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