Partly Cloudy
0°CThu :Sunny. High: 6 Low: -1

Credit metrics of BSE 500 cos weakest since 2008: India Ratings

Credit metrics of BSE 500 cos weakest since 2008: India Ratings

New Delhi: The credit metrics of BSE 500 corporates, an index of 500 top public listed firms, (excluding banking and financial services) have deteriorated to their lowest level since fiscal year 2008, says a report.

There is a significant rise is debt levels without a commensurate increase in cash margins of these firms and amid mounting economic stress, credit metrics of these companies are “unlikely” to show a significant improvement in FY’14.

According to India Ratings & Research, the total debt of BSE 500 corporates rose by about 192 percent over FY’08-FY’13, while interest expenses rose by a staggering 226 percent over the same period.

The report further noted that the current business environment is more challenging and stressful than the conditions in 2001-03 and during the second half of FY’09.

“The current economic situation provides limited elbow room to the Reserve Bank of India to cut interest rates and for the government of India to embark on large-scale policy stimulus,” India Ratings said.

In such a situation, corporates have to depend upon the strength of their own balance sheet as well as on their ability to generate free cash flows and maintain a liquidity cushion, it said.

During fiscal year 2009 to 2012, debt levels registered an average yearly growth of 20 percent but there was moderate growth in debt levels in fiscal year 2013 (10 percent y-o-y) largely owing to low capex and banks’ aversion to incremental lending particularly to certain stressed sectors.

Also going forward, Ind-Ratings does not envisage a significant rise in debt level in FY’14 as a majority of the incremental debt are likely be raised for expanding working capital cycle.

Sectorwise, no immediate improvement is likely for the capital intensive and highly leveraged sectors such as construction & infrastructure, shipping, oil & gas and metal & mining, the report said.

However, sectors like pharmaceuticals, IT services (excluding companies with appetite for leveraged acquisition), cement (large integrated players) and FMCG are unlikely to see any deterioration in credit profile considering their stabilising margins and low leverage levels, it added.

 

Top Stories

Saina_Nehwal_SwissOpen_AP

Saina beats Chinese adversary Shixian Wang in Superseries Finals

December-18-2014
Heading Indian lady shuttler Saina Nehwal beat ruling Asian Games champion Shixian Wang of China 21-17, 21-18 to win the first match
MTE1ODA0OTcxOTg4MDU5NjYx

Amitabh Bachchan becomes the king of Twitter

December-18-2014
In an examination report of the most famous Bollywood stars on Twitter, Big B with 12 million adherents on Twitter beat the
Sensex on budget day

India Sensex Ends Five-Day Decline as Asian Shares Rally on Fed

December-18-2014
Indian stocks climbed the most in six weeks, with the benchmark list stopping a five-day slide, as the rupee reinforced and worldwide
PM_Modi_Rajya_Sabha_PTI_650

PM Narendra Modi in Rajya Sabha Today, But BJP Adamant He Will Not Speak on Conversions

December-18-2014
New Delhi : Head administrator Narendra Modi will be in the Rajya Sabha today, however the decision BJP has concluded that it
IndiaTvec82b0_Abdul-Hamid

Bangladesh President to touch base in India on six-day visit today

December-18-2014
New Delhi: In a first-ever visit by a stately Head of Bangladesh, its President Abdul Hamid will touch base here on Thursday
tata-steel_660_121614054109

Tata Steel Close to Reopening its Top Iron Ore Mine

December-17-2014
New Delhi: Tata Steel may be permitted to resume creation from its greatest iron mineral mine in the not so distant future,