Our banking system is suffering from the heavy burden of non-performing assets (NPAs), especially from long gestation infrastructure projects in the power and metals sectors. Often, projects are delayed due to multitude of regulatory approvals from local, state and central governments, each of which has high discretionary power. Judicial intervention through public interest litigations or otherwise also delay projects, especially since the judicial system itself is struggling with pending cases. Many infrastructure projects start with high leverage and promoters often delay raising equity so that they can get better valuation when the project nears completion. But if there is delay in completion, unavailability of equity makes the project excessively leveraged. Most end up having cost overruns even in today’s deflationary era. Rupee depreciation is one of the contributors to these cost overruns.
Active mid, small-cap funds look smart in this market correction
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