Coronavirus spread: Banks' exposure to travel, hospitality sectors at risk

65 listed firms in travel and tourism sector had Rs 30,500-cr outstanding loans in Sept.

Lenders’ exposure to the travel and hospitality sectors is at risk because of the economic disruption from the novel coronavirus (COVID-19). The 65 listed companies in the sector had combined outstanding loans worth around Rs 30,500 crore at the end of September 2019, up 37.2 per cent year-on-year (YoY) compared to the corresponding period a year ago.

The companies had total loan outstanding of around Rs 22,200 crore at the end of September 2018.

Hotels are the biggest borrowers followed by airlines. Hotel chains such as Indian Hotels, Chalet Hotels, Lemon Tree Hotels, and Asian Hotels (North) accounted for around 50 per cent of the combined borrowings of firms that Business Standard analysed.

Coronavirus spread: Banks' exposure to travel, hospitality sectors at risk

The analysis excluded unlisted large borrowers such as Air India and defunct companies such as Jet Airways, Cox & Kings and Kingfisher Airlines.

Among individual companies, SpiceJet was the most indebted in the industry. The airline had total outstanding debt of around Rs 8,800 crore at the end of September 2019, against Rs 1,217 crore a year ago. It was followed by Coffee Day Enterprises, which had debt worth Rs 6,500 crore at the end of September 2019, up from Rs 4,410 crore a year ago; Indian Hotels (Rs 3,500 crore); and, Mahindra Holidays (Rs 1,770 crore).

Airlines are facing the brunt of the disruption caused by COVID-19 as countries restrict air travel and travelers themselves cancel holiday plans. A prolonged decline in air travel is likely to hit SpiceJet’s finances, given its highly leveraged balance sheet. Its debt of around Rs 8,800 crore at the end of September 2019 was backed by a negative net

worth of Rs 461 crore, putting the airline and its lender in a financially vulnerable position.

In comparison, market leader Interglobe Aviation that runs IndiGo had total outstanding debt of around Rs 622 crore at the end of first half of financial year