Indian tycoons including Ajay Piramal and Pallonji Mistry are grappling with a prolonged realty slump that’s adding to the shadow banking crisis, showing that even the nation’s richest can’t escape widening cracks in the debt market.
Ratings of some companies in the conglomerates run by billionaires Piramal and Mistry have been cut as the business environment worsened and funding costs rose. Rating companies also raised doubts about the debt repayment capabilities of a developer controlled by the nation’s richest property tycoon, and president of Bharatiya Janata Party’s Mumbai unit, Mangal Prabhat Lodha.
“The deteriorating credit profiles of tycoons will have far-reaching implications in terms of ratings and lending,” said Sandeep Upadhyay, managing director of Centrum Infrastructure Advisory Ltd., which focuses on real estate and infrastructure.
The weak performance of property businesses and an acute liquidity crunch were cited as key reasons for rating downgrades. While the Indian economy is forecasted to grow at 6.1% in the June quarter from a year ago, well below the 7-8% growth seen in the past few years. Wariness in credit markets still remains high with little respite in sight.
Source: Economic Times
