2016 — India Inc’s year of fire sales

The year 2016 will go down in the history of India Inc for the record number of fire sales as companies struggled with stressed balance sheet and banks burdened with bad loans. For years in the past, companies across all spectrum — from real estate to rubber, from software to salt and from communications to power — had expanded their operations by investing heavily. Companies got funding from banks at cheaper rates, private investors pumped in money in the business and foreign investors, too, bought their greenbacks. In many cases, companies ended up biting more than they could chew, which led to debt in balance sheets and wide scale default.

However, with the slowdown in the economy, many companies could not keep their revenue stream going and instead started selling their non-core assets. The situation got complicated as various government policies changed and there were a lot of activism over environmental issues by non-governmental organisations. Moreover, banks are aggressively putting pressure on companies to repay their outstanding loans and are no longer doing any kind of restructuring. Even pressure is building from Reserve Bank of India on Indian public sector banks to recognise bad loans with an aim to clean up bank balance sheets by March 2017. In fact, a report by Credit Suisse points out that the total borrowings of top 10 indebted groups stood at Rs 7.5 trillion.