Aggregate interest cost of 768 companies down by 7.3 per cent in second quarter

Pradip Kumar Dey, FE Research Bureau

The aggregate interest cost of 768 private sector companies was Rs 3,624 crore during July-September 2001, a 7.3 per cent decrease over the July-September 2000 level of Rs 3,910 crore. The present study attempts to determine the trend of interest expense-net sales ratio for 768 companies spread over 26 industries during July-September 2001 and July-September 2000.

Industries selected are tea&coffee (13 units), food products (21), pharmaceuticals (37), other chemical products (85), tobacco (2), cotton textiles (64), cement(18), hotels (12), tyres&tubes (5), electrical goods (42), computer (hard&soft) (40), fertilisers (7), manmade fibres (13), engineering others (66), sugar&breweries (16), auto&ancilleries (25), shipping (8), paper (21), electricity (3), iron&steel (22), misc. (218), paints (4), diamonds (3), communications (2), aluminium(3) and diversified (18).

Of the sample companies, the top 10 according to the interest-sales ratio during July-September 2001 are Dupont Sportware (187.50 per cent), Ankur Drugs (120.37 per cent), Lakshmi Syn.(107.81 per cent), Namaste Exports (75.47 per cent), Balaji Distilleries (75.27 per cent), Phopnix Mills (74.69 per cent), Jain Studios (73.63 per cent), Shree Steel Wires Ropes (58.06 per cent), SIP Plastics (56.52 per cent) and Wellman Incandescent (55.12 per cent).

Four hundred and eighteen companies have witnessed a fall in interest expense-sales ratio, while 349 companies have shown a higher ratio, against July-September 2000. One company namely Avanti Feeds maintained the same ratio in both the time period.

A significant fall in the ratio was witnessed in the case of Autoriders International (52.77 per cent in July-September 2000 to 9.09 per cent in July-September 2001), Bakelite Hylam (11.71 per cent to 4.74 per cent), DLF Universal (23.50 per cent to 5.63 per cent), Essar Shipping (12.40 per cent to 4.67 per cent), Kanoria Industries (31.03 per cent to 11.92 per cent), Kirloskar Electric (64.95 per cent to 19.50 per cent), Nirlon (15.92 per cent to 5.85 per cent), Tamil Nadu Tele (16.95 per cent to 6.26 per cent) and Willard India (18.22 per cent to 4.33 per cent).

An upward trend in the ratio can be seen in the case of Ajanta Pharma (4.23 per cent in July-September 2000 to 10.27 per cent in July-September 2001), Balaji Distilleries (4.01 per cent to 75.27 per cent), Compudyne Winfosystems (1.23 per cent to 13.26 per cent), Eveready Industries (8.21 per cent to 12.27 per cent), Jain Studios (2.50 per cent to 73.62 per cent), Pradeep Metals (9.73 per cent to 44.78 per cent), Texplast Indus (3.46 per cent to 14.71 per cent) and Zee Telefilms (6.27 per cent to 13.85 per cent). The top 10 companies that shelled out the most in finance charges (interest expense only) during July-September 2001 were Reliance Industries (255 crore), Reliance Petro (Rs 246 crore), CESC (Rs 110 crore), Telco (Rs 101 crore), Jindal Vijaynagar (Rs 101 crore), Tisco (Rs 95 crore), Larsen&Toubro (Rs 90 crore), Tata Power (Rs 89 crore), Arvind Mills (Rs 73 crore) and Grasim (Rs 48 crore).

Among the above 10, significant increase in interest payment during Q2 was witnessed in the case of Jindal Vijaynagar Steel. The interest payment of the company increased by 128.0 per cent to Rs 101.27 crore during July-September 2001 from the level of Rs 44.41 crore during July-September 2000.

On the other hand highest decline in interest payment was observed in the case of Grasim (-20.9 per cent). At the aggregate level, the interest-sales ratio of 768 companies decreased from 4.99 per cent in July-September 2000 to 4.54 per cent in July-September 2001, which were indicative of the fact that the interest burden on private corporate sector witnessed a declining trend in July-September 2001 from the level of July-September 2000.

A similar trend in the industry-wise ratio was witnessed in the case of pharmaceuticals (2.78 per cent in July-Septembe 2000 to 2.62 per cent in July-September 2001), other chemical products (3.34 per cent to 2.85 per cent), tobacco (2.20 per cent to 1.32 per cent), cotton textiles (8.99 per cent to 7.75 per cent), cement&products (8.43 per cent to 6.78 per cent), electrical goods (5.98 per cent to 5.54 per cent), fertilisers (6.55 per cent to 4.90 per cent), manmade fibres (6.38 per cent to 4.43 per cent), engineering others (5.36 per cent to 4.79 per cent), auto&ancilleries (3.87 per cent to 2.88 per cent),shipping (10.24 per cent to 6.88 per cent), paper&products (7.46 per cent to 7.09 per cent), paints (1.68 per cent to 1.45 per cent),diamonds(4.56 per cent to 2.99 per cent), communications(4.27 per cent to 3.51 per cent), aluminium (3.12 per cent to 2.22 per cent) and diversified(4.67 per cent to 3.92 per cent).

A reverse trend can be seen in the case of tea&coffee (3.23 per cent in July-September 2000 to 3.47 per cent in July-September 2001), food products (1.36 per cent to 1.43 per cent), hotels (6.39 per cent to 8.54 per cent),tyres&tubes(5.64 per cent to 5.97 per cent), computers (hard&soft) (2.10 per cent to 3.01 per cent), sugar&breweries (5.87 per cent to 6.04 per cent), electricity (7.56 per cent to 9.04 per cent) and iron&steel (6.61 per cent to 8.52 per cent).

The highest increase in interest payment during July-September 2001 was witnessed in the case of iron&steel industry (29.9 per cent). And the highest and lowest interest-sales ratio was observed in July-September 2001 in the case of electricity (9.04 per cent) and tobacco (1.32 per cent).