1. Relief for corporate India as debt burden lessens

Relief for corporate India as debt burden lessens

While the total debt for a clutch of 403 companies in the BSE 500 universe came off in 2015-16, the interest burden on them increased...

By: | New Delhi | Updated: August 1, 2016 7:01 AM
The SARFAESI Act allows the central government to issue notificaiton making any provisions of the legislation applicable to a 'class or classes of banks or financial instiution' which shall be laid before the Parliament for a period of 30 days. (Reuters) While the combined debt of the 403 firms fell 3.5% to `24.3 lakh crore at the end of FY16, the interest outgo increased by 4.8% to `1.8 lakh crore. (Reuters)

While the total debt for a clutch of 403 companies in the BSE 500 universe came off in 2015-16, the interest burden on them increased, reports Yoosef KP in Mumbai. An analysis of data sourced from Bloomberg reveals the ratio of the interest costs to total borrowings  increased to 7.34% from 6.76% in 2014-15. Experts said it was possible some of the firms in the sample had been compelled to either refinance their long-term loans or borrow more at higher rates of interest.

While the combined debt of the 403 firms fell 3.5% to `24.3 lakh crore at the end of FY16, the interest outgo increased by 4.8% to `1.8 lakh crore. That is despite the fact that more than half the firms were able to pare debt during the year by either selling assets or generating higher cash flows to repay loans.
Jaiprakash Associates, for example, as managed to reduce consolidated debt by over `17,000 crore; the company sold two hydro power plants to JSW Energy.

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Recently, it inked an agreement with Ultratech Cement to sell its cement division for an enterprise value of  Rs 16,189 crore. Reliance Communications and Reliance Infrastructure too have brought down their combined debt by Rs 9,615 crore during the year. The group has been looking to sell assets across companies to generate resources. In some instances a restructuring of businesses has resulted in debt coming down; Sterlite Technologies, for instance, spun off its power business into a separate unlisted company resulting in smaller borrowings of Rs 4,490 crore.

Anand Agarwal, CEO, said the demerger has resulted in a transfer of Rs 4,200 cr of net debt from the company’s balance sheet and consequently the debt equity ratio had improved from 4.5x to 1.4x

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