While on the subject of infrastructure, I would like to add that one cannot fund the growth of the infrastructure sector based on debt alone. As the situation stands, many of the stalled infrastructure projects have been financed solely by debt and promoters’ equity contribution is absolutely minimal.
Our observation is that often debt is raised in the holding companies and is down-streamed as equity in subsidiary ventures or SPVs. This is a risky practice. Corporate groups have become hugely leveraged and their debt servicing abilities have been severely constrained. The promoters of stalled infrastructure projects have little incentive to bring the projects on stream.