Debt Refinancing

Cash Flow management is one of the key success drivers for any business. The importance of this is magnified even further in today’s scenario where there is a nationwide lockdown of over 60 days as a measure to curb the spread of the global COVID-19 in the country. The business sentiments across the globe are on a downward trajectory, and here at home the RBI Governor in his address has already indicated that the impact is worse than the earlier estimate and the annual GDP growth rate for this fiscal year might be in the negative. The situation is even more critical for businesses with huge CAPEX requirements upfront like the infrastructure companies or for companies involved in regular manufacturing and allied activities who have recently undertaken CAPEX and expansion activities funded by debt.

How Will The Lockdown Impact The Business?

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COVID-19 (Coronavirus) is having an unprecedented and devastating impact on businesses. Travel restrictions, disrupted supply chains, subdued demand and labour issues have unsettled the businesses resulting in:

• Lower demand and thus lower top-lines
• Default and renegotiations of contracts
• Delay in receivable liquidation
• Cost escalations
• Decline in profit margins
• Reduced credit terms from suppliers

How Would This Impact The Repayment Of The Loan?

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The above will lead to cashflow mismatches and thus cause a difficulty in meeting current debt obligation. The issues would be magnified in companies where:

• The loan moratorium period has ended or is about to end
• The operations post-expansion have not yet stabilised hence cant service the debt immediately
• The cash flow mismatch due to tenure of loan being shorter than project lifecycle, especially in infrastructure project companies
• Education Institutions facing cashflow mismatches due to shorter tenor of loans
• Larger EMIs being difficult to service due to reduced scale of operations in short term due to COVID-19
• Companies with a relatively higher cost of borrowing

How Should One Tackle The Situation?

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A proper financial plan is a prerequisite in this time of crisis. A comprehensive cashflow estimate has to be prepared and analyzed to determine the expected shortfalls and a thorough plan needs to be prepared to address the shortfall determined.

How Can InCorp Help You?

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We have formed a specific team of expert advisors who would devise a custom plan for your business after studying the specific challenges facing your business. We would assist you in restructuring / refinancing the debt to addresses the issues above. The refinance of limits would ease cashflow pressures by:

• Deferment of the principal repayments by extending the moratorium period of the loan
• Increased tenor of the loan to match project cashflow timelines
• Additional Short Term / Long term corporate loans to tide over shortfall in funds
• Structured repayment schedule to match project cashflows
• Reduced rate of interest
• Optimised loan structure