Industrialists Tide through OR Go down under

A very important development that is happening in Indian markets needs to be understood. The Government is now not helping most of the industrialists tide through crisis and letting them go down under. The effect is that lot of major Indian Corporate groups are now thinking about deleveraging their balance sheets and repaying back to banks. These Corporate groups have also understood the risks of high leverage. In the future, if their newer generations are not able to manage high leverage, the entire company could go down under. That is the risk they don’t want to pass to future generations. Reliance is talking about deleveraging. Tata Group right from Tata Steel to Tata Motors are thinking about deleveraging. The trend could soon gather momentum. Now even the stock exchanges have asked brokers to increase margins on FO stocks, where promoter pledges are greater than 25% of their holdings. If major credible Corporates start paying back big loans, banks will be awash with a lot of funds with not enough credible borrowers to lend.

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