Heavy Double-Leveraging Risks on the Rise, Due to Infar Funding: Icra

Monday, May 21st, 2012 | by

Top domestic credit ranking group Icra has announced that multiple ways of fund-raising will augment risks posed to money-lenders. The agency has stated that risks arise from double- leveraging, usually indulged in by private sector units in the infrastructure bay.

Icra, who has an association with global player Moody’s has noted that the PPP model, is fast becoming popular in the infra space. Many developers, whose projects are executed through ‘project-specific special purpose vehicles’ on the road, power, port, and airport sectors, are now resorting to funding through multiple ways.

“While infra assets are generally required to have an equity contribution of around 25-30 per cent from the developer, the increasing trend of raising debt at the holding company level and infusing it as equity in SPVs is resulting in high leveraging of these assets,” says Icra.

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