India Incs interest outgo doubles in Q2

Written by Pradip Kumar Dey | Mumbai , Nov 9 | Updated: Nov 11 2008, 04:12am hrs
The toll of the tight money conditions and high interest rates has been felt the most in the second quarter of the current fiscal. A study carried out by FE indicates that interest outgo for a sample 1,445 companies has doubled or increased by 100.3% during the second quarter of FY09. The interest outgo for these companies grew to Rs 16,553 crore during the second quarter, from Rs 8,264 crore during the previous year.

For some of these companies, interest expenses account for around Rs 44.6 of every hundred rupee of revenue generated.

However, rising sales meant that the impact of rates could not have a significant impact on margins. The aggregate sales of 1,445 companies increased by 37.5% to Rs 6.53 lakh crore during July -September 2008 from the level of Rs 4.75 lakh crore during July-September 2007.

The net profit of the above number of companies decreased by 39.2% to Rs 32,433 crore in July September 2008. Therefore, the interest-to-sales ratio and interest-to-total expenditure ratio increased from 1.74% to 253% and 2.09% to 2.82% respectively during the period.

Interestingly, four public sector enterprises are included among the top five companies in terms of interest outflow. Bharti Airtel with an outflow of Rs 1,076 crore is the leader of the pack. In fact the telecom sector has seen one of the highest outflow on account of interest costs. And, this is one of the factors that have kept the analysts on tenterhooks. They reckon that the high amount of borrowing by telecom companies will start negatively impacting earnings growth.

Among others Indian Oil (Rs 993 crore) took the second lead. High crude prices and under-recovery meant due to administered prices cause the other OMCs such as HPCL and BPCL to feature amongst the top five interest-paying companies.

Of these 1,445 companies,1036 companies have witnessed an increase in interest cost. At the same time, there were 373 companies that have actually managed to lower their interest costs and around 36 companies managed to keep them at the same level.

In the same light, 867 companies witnessed an increase in interest expense-sales ratio, while 563 companies have shown a lower ratio, against July to September 2007. Fifteen companies maintained the same ratio in both the three-month period.