Lanco Infra

There was some worrying news from Lanco Infra. Apparently, it has been forced to delay salary payments to its employees after creditors refused to extend new loans to the debt-laden infrastructure builder battling cash-flow problems. The group is stated to have 6800 employees on its payroll and its monthly bill is around Rs.75 crore. It has been delaying payment of salary to nearly 3000 of its employees over the past one month. October salaries were cleared on 23rd Nov. The company is currently sitting on debt to the tune of a whopping Rs.32,500 crore. It is now looking at ways and means to raise funds, with banks refusing to lend more. It is raising more debt, around Rs.11,140 crore from China Development Bank for developing two 1,320 megawatts (MW) power projects in Uttar Pradesh. It is also planning to sell stakes and some assets to bring down its debt.

Lanco has an operating capacity of 3,924 MW. Average plant load factor (PLF), an indicator of a power plant’s capacity utilization, was at 45%. Another 4,636MW of coal, gas, hydro, solar and wind power projects are under various stages of execution. It hopes to take the capacity to 13,000MW by 2015. For Q2FY13, the company remained in the red though the loss narrowed. Its consolidated net loss came in at Rs.35.93 crore from Rs.259.48 crore in Q2FY12. The earnings were hit by fuel shortages and underutilization of capacities at its power projects. Unless the company manages to sell stake or some assets and brings down its debt, and the macro economic factors for infra companies like Lanco improves, the immediate outlook does not look too optimistic.