In yet another tollway default, an SPV owned by GMR Infra has had delays in servicing debt, and has been downgraded to D (default) status by CARE. GMR Hyderabad Vijaywada Expressway Pvt Ltd (GHVEPL) has an incredible excuse for their troubles:
GHVEPL is located in the state of Telangana and Andhra Pradesh. Post bi-furcation of the state, both the state governments have formulated the sand mining policy, banning movement of minor minerals (especially sand) across the state border. Further, states have imposed levy of new taxes like octroi and entry tax on movement of goods across the state border. Due to such changes in the policies, the commercial vehicle traffic on account of movement of sand has drastically reduced from the projected traffic. Commercial vehicles contribute significant amount of revenues. This has severely impacted the revenues and cash flow of the company resulting in slight delay in payments.
So now it’s like “Oh we can’t pay because you won’t allow sand to be moved”, so we’re going to default.
This is a 300+ cr. exposure for GMR Infra too – which has both equity (90% in the project, a 200 cr. preference share holding and has lent further unsecured money to it).
In what is potentially a “mega” issue for banks, there’s 7800 cr. of loans from Jaypee Infratech downgraded to Default rating by CARE. Jaypee is also listed.
This is the company that runs the Noida-Agra “Yamuna” expressway, on which there’s the formula 1 track and a lot of real estate.
Jaypee’s not yet defaulted – CARE’s rating document only mentions a delay. But they are apparently quite likely to default. We don’t know of any mutual funds that hold the debt.
The hit of 7800 cr. – of which 6550 is bank loans and the rest in debentures – will be quite a blow to the banking sector; but we fully expect the loans to be restructured and stretched over.