Firms eye equity to pay off debt

Mumbai: The sharp rise in the stock prices of companies in the cyclical sectors like infrastructure, capital goods and construction would see companies from these sectors raising fresh funds from the capital markets and deleveraging their balance sheets.

According to a survey conducted by Barclays, leading corporate representatives expressed hopes about repairing their balance sheets, as they believe that the positive sentiment generated by the election verdict had itself improved the economic climate.  

“Some expressed hope that the sharp recovery in the prices of cyclical stocks could enable companies to return to the capital markets, raise funds and accelerate balance sheet repair. GVK Infrastructure, for instance, outlined plans to return to the equity markets in the near future,” it said.

While the absolute majority received by BJP has raised expectations about long pending economic reforms, majority of the respondents however hoped for an improvement in governance by the incoming   administration.

Participants in the survey noted that although legislative actions like the goods and services tax (GST) are crucial, they believe the immediate focus should be on execution rather than legislation.
According to Barclays, several participants were of the view that the approvals process could be expedited, that stalled projects required close monitoring and critical issues such as the coal supply shortage need to be resolved.

“For instance, expediting three key railway links in Eastern India could significantly improve availability of coal for nearly 30GW for the upcoming power plants in the country,” Barclays added.