Page 16 - Intl. Review (Draft 1.3)

SHIVAJI INTERNATIONAL REVIEW

tuation, which realized itself in banks allowing stressed cor- tal injections held great promi-
the NPA crises’ case, hammered porations extended debt-in- nence in ploughing productivity
home by the great GFC wreak- dulgence time after time in the onwards. All this cursory sheen
ing havoc. Whilst the eager- hopes of long-term viability by giving off the vibe of economic
ly investing banks strew loans letting off the steam. With round wellbeing, and without adverse
en masse with little regard for after round of restructuring, economic headwinds or obvious
contingencies self-encumber- nearly 6.4% (2014-2015) of the red flags, banks felt little onus
ing themselves in vogue even- entire outstanding mass within a upon their lazing prerogative to
tually condensing into anchored single fiscal year at times, leav- diligently access the real state
weights of debt impairment. ing stressed assets suspected to of their borrowers’ plummeting
be even higher than what the projects, to peruse under the
2.2 Revelations; Worse gets 9% NPA figure would lead one to carpet.
Worser. believe.
A startling 40% of NPA-lad- 3.1 Saviour of the Syndicate
en corporates of India stood 3. HISTORICAL ACTION And that’s where we circle
reeling with an Interest Coverage Before exploring the after- back to the RBI actions and reg-
Ratio (ICR) of less than 1 (ICR be- math however, it’s worth explor-
ing the number of times EBITDA ing the justifications for such a
can cover interest obligations, <1 risky bargain. Which, like stated
implying inability of the gains to before, lies with the peculiarities
even cover credit repayments!). of the Indian-way of business.
Even so, the Indian TBS debacle The 2000s heyday of investment
wouldn’t have been this unique booms saw investment propor-
(and rare in its miraculous eva- tions as high as 38% of the GDP,
sion of crisis-spending stag- the major chunk of it funnelled
flations) simply because of the through heavy works of infra-
deontologically dual-hammer- structural undertakings, among
ing of the overleveraging boom which; metal, power & telecoms
& GFC. GFC was a doomsday lead the pack. Projects that first
drop for more economies than got derailed through good-old
one, and even a few decades in fashioned supply-chain and or-
retrograde, the 1990s’ Japan had ganisational inefficacies. And
trudged through a lengthy TBS latter beat down back & blue by
quicksand itself, followed by Ko- the GFC shake-up followed on
rea in the 2000s. by the staggering devaluation of
What differed for India the Indian rupee, which spiralled
however, was an uncannily con- out of bounds to more than a
servative lending during the 50% drop from 40 INR to a dollar,
boom that didn’t in itself over- to 60+. All this made financing
leverage corporates to begin simply too costly, smushing cor-
with, rather it was the protract- porations under the treacherous
ed evergreening leniency of cov- trinity of stressed from burden-
ering for production inefficacies some inputs, derailed revenues,
that coddled the indebted firms and finally the spiralling finance
far beyond acceptable limits. costs itself.
Though arguably speaking, that Even so, growth stood te-
very accommodative nurturing naciously unwavering, waning
by the PSBs was the magic wand here or there by a teensy bit,
that helped curb any crisis-in- but not tumbling into a grinding
ducing winding ups, displaying a halt. A strange dichotomy mostly
weird flex of bankruptcy-phobia. attributable to the pre-existing
In classic Indian fashion, lack of foundational infrastruc-
deadlines were pushed with the ture, to which even incremen-

15 SPRING 2021