16th Feb 2017 08:43
LONDON (Alliance News) - Infrastructure India PLC on Thursday said cargo movement volumes for its investee company Distribution Logistics Infrastructure Ltd have not yet recovered to the level they were at prior to the government of India's demonetisation change in November.
Shares in Infrastructure India were down 20% at 6.60 pence on Thursday morning.
In December, the group said its 99.9%-owned investee had experienced a "dramatic deceleration" of cargo movements since November when Indian Prime Minister Narendra Modi said both 500 and 1,000 rupee notes would be withdrawn from the financial system in a bid to crack down on corruption.
At the time around 45% of transactions were made in notes with denominations of 500 rupees or more, and around 90% of daily transactions are made in cash.
The group on Thursday said recovery to levels seen before the announcement of demonetisation remain subject to recovery of underlying sectors, in particular manufacturing.
However, despite the market challenges, Infrastructure India said Distribution Logistics' Nagpur terminal continued to operationally progress, with the facility having commenced stuffing of export containers in December. The facility received approval for public bonded warehousing in January and then quarantine clearance for timber in February.
Additional funding had been expected to be available following the flexible restructuring of its debt, but India Infrastructure said the implementation of restructuring by the lending banks has "proceeded very slowly".
As such, Distribution Logistics has not been able to operate at full capacity and this, together with the impact of demonetisation and compressed margins, means it will be "difficult" for the company to generate an operating profit this financial year.
Infrastructure India is assessing Distribution Logistics' funding requirements and its reliance on banks.
By Hannah Boland; [email protected]; @Hannaheboland
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